Oil wars and world orders - old and new

Aufheben analyse the 2003 invasion of Iraq in the context of US foreign policy and geopolitics since the 1980s.

While the American-led interventions in Bosnia and Kosovo during the 1990s were presented as ‘humanitarian wars’, it was hard to disguise the fact that the invasion of Iraq was primarily motivated by a drive to reassert American power, and in particular its control over the world’s oil supplies. However, in reasserting its power, America has exposed serious fault lines within the 'international (bourgeois) community'. Indeed, in finishing off the job that his father had left done Bush Jnr ended up undermining the New World Order that Bush Snr had proclaimed with his war on Iraq. In this article we seek to place the recent Gulf War in the context of the evolving geo-political-economy that has shaped American foreign policy since the Iran-Iraq conflict.

The American-led interventions in Bosnia and Kosovo during the 1990s were presented as 'humanitarian wars'. With the widespread, if not always universal, support of the 'international (bourgeois) community', the liberal apologists for such wars were able to claim that they were being waged to uphold the universal norms of the 'civilised world' that now overrode the old principles of national sovereignty. The conflicting material interests underlying these military adventures were far from apparent.

In stark contrast, it was hard to disguise the fact that the invasion of Iraq was primarily motivated by a drive to reassert American power, and in particular its control over the world's oil supplies. In the face of naked American imperialism, which was determined to take Iraqi oil by force, the 'international (bourgeois) community' was openly split between those who sought to oppose the US and those who favoured a policy of appeasement.

As a consequence, the fashionable talk about 'globalisation', of the emergence of a unified 'transnational bourgeoisie', of an all embracing yet amorphous 'Empire', and of the terminal decline of the nation state has been shoved to one side. The need to understand the geo-politics of the current epoch of capitalism in terms of imperialism and the relation between nation states and 'national capitals' has reasserted itself.

We do not propose to enter into a detailed discussion here concerning theories of globalisation and imperialism. However, it is necessary to make a few preliminary points and observations.

Recognising the continuing importance of imperialism and the nation state does not mean that we return to the classical theories of capitalist imperialism associated with Lenin, Bukharin and Luxemburg. Neither does it mean that we accept the anti-imperialist conclusions that have often been drawn from these classical theories of imperialism, which would lead us to 'critically defend' the 'weaker' capitalist states against the 'stronger'. Whatever their merits, and whatever their errors, these theories belong to a past era of capitalism. However, rejecting 'globalisation' theories does not mean that we deny that there has in recent decades been, in some sense, a tendency towards the 'globalisation' of capitalism that has redefined and reformed the relation of the state to capital.

Of course, it is true that since the second world war the growth in international trade has consistently outpaced the growth in world production. As a consequence, international trade has become increasingly important. However, after the collapse in world trade that came with the break down in the gold-standard in the 1920s and the world slump in the 1930s, the level of world trade was at a low point. Indeed, it has only been in the last few years that world trade as a proportion of the total world production has reached the levels that had existed on the eve of the first world war.

Of course, it is also true that the scale of production in many industries has gone beyond the limits of European sized national economies. Production of many complex manufactured commodities (e.g. cars) are spread across national frontiers and such commodities are produced for more than one national market. But it is only in a relatively few industries that the production and realisation of surplus-value has reached a global scale. At most the 'industrial circuits of capital' are confined to distinct continental blocs. Even in a relatively open economy such as the UK more than two thirds of output is for the domestic market and more than half of what is exported remains within the European Union.

Since the 1970s the development of world money-markets has given rise to what we have termed global finance capital. Vast flows of largely fictitious capital, which dwarf the value of international trade, now swoosh around the world. This growth of global finance capital undoubtedly has led to growing interconnections amongst the world's bourgeoisie and ruling classes as the ownership of surplus value and the direction of its capitalisation have become increasingly internationalised. Nevertheless the ownership and control of most major transnational corporations are concentrated in one country. Furthermore, despite the emergence of supra-national organisations of 'global governance', the nation state remains the principal centre for the political organisation of capital necessary for the mediation of class conflict and for the securing the social and economic conditions for capital accumulation. Thus, despite the 'globalisation of capital', we can still talk about various national bourgeoises, organised around particular nation states, with their own distinctive interests and policies.

Any understanding of the current geo-politics of world capitalism must therefore be in terms of the relations between nation states determined by the underlying tension between the globalisation of finance capital and the far more limited internationalisation of the production and realisation of surplus-value.

The fall of the Berlin Wall in 1988 opened up the prospect of a unified global capitalism. The capitalist counter offensive, which had sought to outflank and break up the entrenched positions of the working class in the core western capitalist economies, now found itself with far more room for manoeuvre. With the end of the cold war there was no longer any overriding military or ideological constraints to the full implementation of the neo-liberal policies that had been pioneered by Thatcher and Reagan. With the 'end of history' and the triumph of liberalism and 'free market' capitalism, all national economies had no option but to compete in the new 'global markets'.

In the core capitalist countries of the West, particularly in Western Europe, the 'modernising' factions of the bourgeoisie, armed with the 'free market' triumphalism that accompanied the break up of the Eastern Bloc and the demise of 'actually existing socialism, could now press with fresh vigour for the rolling back of the social democratic post-war settlements and the rigidities and restrictions these placed on the competitiveness and profitability of capital.

In the periphery, the end of the cold war meant that there was no longer any need, on the part of western capitalism, to tolerate the various forms of state-led 'national economic development' that had served to bolster 'third world' states against the 'threat of Communism'. No longer able to play the two superpowers off against each other, the ruling classes of the periphery had little option but to allow themselves become mere local agents of international capital - opening up their nations assets to the plunder of transnational corporations and predations of the western bankers in return for a share in the spoils.

However, the prospect of a unified global capitalist utopia, in which an increasingly transnational bourgeoisie would be free to make a profit how and where it liked, assisted by compliant nation states eager to attract capital investment, was tempered by the very real danger of the disintegration of global capitalism. From the end of the Second World War the common and overriding 'threat of Communism' had served to contain rivalries amongst the western imperialist powers. During the long cold war each nation state in the West had been prepared to compromise their immediate interests in order to maintain western unity. With the fall of the eastern Bloc this was no longer the case.

Following the German and Japanese economic miracles of the 1960s there had been a distinct tendency for the break up of western capitalism into three distinct economic blocs centred around the USA, Germany and Japan. However, despite the economic integration of Western Europe within the European Union, this tendency had always been held in check by the common military threat posed by the USSR. With the collapse of the Warsaw Pact and Comecon, the way was open for Eastern Europe to be integrated into a German centred European Union, which would displace the US as the world's largest market and which would also provide German industry with a cheap but highly trained workforce. In Asia the increasing volumes of Japanese foreign investment, which had greatly increased since the rise of the Yen in second half of the 1980s, could be seen as further evidence of the consolidation of an Asian Bloc around Japan.

However, the only state power with the global reach capable of securing a new global order against 'rogue states' and popular resistance to the destabilising effects of an unrestrained 'global capitalism' was that of the USA. Yet, with the fall of the USSR, there re-emerged powerful isolationist tendencies within the US bourgeoisie that were reluctant for the USA to take up the burden of 'world policeman'.

The USA's rapid industrialisation in the late nineteenth century had been made possible by the insularity of its economy from the dominance of British manufacturing in the world market. Sheltered by its distance from Britain and protected by high tariff barriers, America's continental-wide economy had provided ample room, and a plentiful supply of raw materials, necessary for the development of the modern large scale capitalist industry of the age.

Against the calls for free trade, and the gold standard, and hence integration into the world market, advocated by the political establishment and bankers of the East Coast then represented by the Democratic Party, large sections of the American industrial bourgeoisie had allied themselves with petit-bourgeois producers and small farmers of the West to form a strong tradition of Populist isolationism in US politics. Even in the 1920s and 30s, when the US had become the most advanced capitalist economy in the world, and had little to fear from free trade and foreign competition, isolationism remained a potent political force. Isolationism was able to overcome the attempts to develop the more liberal and active foreign policy pursued by President Woodrow Wilson, which had led to the USA's intervention in World War I and which had culminated in America's leading role in the formation of the League of Nations.

It was only after World War II that this isolationist tradition was submerged as the American bourgeoisie were mobilised against the 'world-wide threat of Communism'. Even then isolationist tendencies were not entirely eliminated. During the period of detente in the 1970s many European leaders had feared isolationist tendencies in America would lead to the US disengagement from Europe. With the decline and fall of the USSR the way was open for a resurgence of US isolationism.

Of course, the economy of the USA in the late 1980s was very different from what it had been 50 years earlier. The growth of world trade and international capital flows, dominated by mostly American banks and multinationals, in the decades following the World War II had meant that the accumulation of American capital was far more interdependent with capital accumulation elsewhere in the world than it had been during the inter-war years. With investments of American capital across the western world, the US state could not so easily disentangle itself from its commitments as the sole world super-power. Nevertheless, faced with the huge costs of maintaining the global reach of US military and geo-political dominance, a substantial coalition could be built around the demand for the minimization of the US foreign policy involvement beyond North and South America.[1]

The arguments of this isolationist tendency within the American bourgeoisie were fortified by the perilous state of the US economy at the end of the 1980s. Although Reagan's acceleration of the arms race can be seen to have played an important part in the downfall of the 'Evil Empire', it had also placed the USA in severe economic difficulties. The huge growth in military expenditure, coupled with Reagan's policy of tax cuts for the rich, had opened up a big hole in the Government finances. To finance its growing budget deficits the Reagan government had borrowed vast sums on the financial markets pushing up American interest rates. This had led to a substantial rise in the exchange rate of the Dollar. Faced with both rising interests rates and a highly overvalued Dollar, large swathes of American industry found itself unable to compete with the flood of imports from the 'newly industrialising economies' of East Asia. As a consequence of this flood of imports, America's trade deficit with the rest of the world soared.

It is true that by the end 1980s concerted efforts by the world's leading central banks and strenuous efforts on the part of the US administration had gone some way towards unwinding the gross imbalances generated by the Reaganomics of the early 1980s. But with the financial crisis of 1987 and the subsequent slide into recession there appeared little prospect that such attempts to substantially reduce the huge trade and budget deficits could be sustained.

For many bourgeois commentators, America's economic problems were symptoms of its underlying economic decline that had become apparent since the late 1960s. Far from reversing America's relative decline as a world power, as they had originally been intended to do, Reagan's economic policies had appeared to have greatly accelerated it. Whereas at the beginning of the 1980s the US had still remained the world's largest net creditor, by the end of the decade it had become the world's largest net debtor. It seemed that American manufacturing industry was increasingly unable to compete with 'lean production' methods of Japan, and the cheap and compliant labour of East Asia. Furthermore, America's attempt to follow the historical example of Britain, by prolonging its economic hegemony by shifting away from the production of surplus-value in industrial production to the interception of the surplus-value produced elsewhere by means of its dominance of international finance, looked like being short lived. The Japanese banks and financial institutions, bloated as it subsequently turned out by the unsustainable asset bubble of the late 1980s, now loomed large and threatened to invade American capital's last place of refuge.

Hence, for the pessimists amongst the American bourgeoisie, it seemed that at the very moment of its triumph over its great adversary, the USSR, America had entered the beginning of its demise as the world's economic super-power. America, like all previous empires, it seemed, was destined to decline, weighed down by the sheer military cost of maintaining its imperialist ambitions. At the end of the 1980s, it did not seem to many that the 21st century would be a 'new American century'. The future seemed to belong to the land of the rising Sun.

At first sight it might seem that the fall of the USSR should have allowed the American state to assume the role of the sole global super-power at the same time as gaining a huge peace dividend. With the fall of the USSR, America's military might dwarfed that of all the other major military powers put together. There would seemed to have been plenty of scope for cutting military expenditure without impairing America's ability to 'police' any new world order. Of course, there were powerful interests amongst the American military-industrial complex opposed to large scale cuts in weapon spending, but perhaps a more important obstacle to such cuts was the remaining legacy of the working class offensive of the 1960s and 1970s - the 'Vietnam syndrome'.

The American bourgeoisie has long been reluctant to send their sons (and now their daughters) to war. They have preferred to leave not only the rank and file but also much of the officer corps of the American armed forces to be drawn predominantly from the working class - and in doing so had provided an important escape route and career path out of the urban ghettos. This has been possible because American imperialism was not built on colonialism or prolonged military occupation of foreign lands. Indeed, through much of the century America had sought to break up the old colonial empires of the European imperial powers. Instead, the US has depended on its economic supremacy, covert operations and proxy forces to maintain its on hold its 'empire' and advance its foreign interests.

As a consequence, the American army, in contrast to that of Britain and France, has not been used to export social relations into its dependencies. Nor has the American Army had much practice dealing with the problem of maintaining morale of soldiers stationed in far away places fighting people for interests very remote from their own.

However, the problems for the American military of being involved in a prolonged conflict in adverse conditions in foreign lands during a period of heighten class conflict at home, became all too clear with the Vietnam War. For the American bourgeoisie the defeat in Vietnam, which was to a significant extent caused by the insubordination of the American armed forces, was a humiliation. For the front line junior office who experienced the fragging, mutiny and collapse in morale at first hand, it was traumatic. By the late 1980s this generation of junior officers were graduating into positions of high command giving rise to a general aversion amongst the American military to risky or prolonged military engagements.[2]

The overriding concern of the American military in their strategic and tactical planning, which emerged at the end of the Cold War, has been to avoid both large numbers of casualties and long term military commitments by ensuring the use of overwhelming force.[3] To achieve this objective, military planning has depended on increasing massively the firepower available to each soldier, a preference for air war over ground war and the automation of weapons of war in order to keep military personnel out of the firing range. Yet increasing the 'organic composition of destruction' in this way has meant ever more sophisticated and thus costly weaponry. To avoid the risk of casualties, the reliance on the soldier and his rifle has been replaced by aircraft and 'smart bombs'. As a consequence, the costs of maintaining US military supremacy have escalated.

If the US was to act as global policeman in the post-cold war era, it seemed necessary that the American armed forces would require the capability of intervening anywhere in the world against 'failed' or 'rogue states'. But this meant that the high costs of matching the Russians in conventional and nuclear forces would now be replaced by the huge costs of the rapid deployment of overwhelming force anywhere in the world.

Thus, although there were many amongst the American bourgeoisie whose mouths watered at the prospect of a new unified global capitalism under the aegis of an all powerful American state, there were many who feared that an interventionalist foreign policy would be far too expensive. For the industrial capitalist with large amounts of capital sunk in plant and equipment in America, or with a largely American market; or for those in the ruling and middle classes fearful that the cuts in social provision of the Reagan years would lead to increasing social discontent, a more isolationist foreign policy seemed a more preferable option.

However, there was one trump card that could be used against proponents of isolationism - that card was the American economy's dependence on oil. With the depletion of oil reserves in the Americas, the US faced the prospect of increasing reliance on the one of the most volatile and militarised regions of the world - the Middle East. It was around this issue of oil that Bush Snr sought to resolve the dilemma between an expensive interventionism and a cheap isolationism by adopting a policy of multilateralism with his 'New World Order'. And it is therefore no surprise that Bush Snr's 'New World Order' was both proclaimed and consummated with the Second Gulf War of 1991 - a war fought by American, British and French forces, but paid for by Japan, Germany and Saudi Arabia.

The Iranian Counter-Revolution in the early 1980s had dramatically altered the situation in the Middle East and particularly the all important oil rich gulf states for America and the West. The long established pro-western Shah had been replaced by a pan-Islamic theocracy committed to spreading its version of anti-western Islamism across the middle east and beyond. The rift between the USA and Saudi Arabia, which had arisen over Israel and the oil blockade of 1973, had largely been overcome by 1979 and the internal conflicts between the traditionalist and the modernising middle classes had been mitigated by the greatly enhanced oil revenues. However, despite being well equipped, Saudi Arabia's army was generally regarded as being ineffective, leaving the country vulnerable to hostile neighbours. Furthermore, while the internal tensions were to some extent contained by the growth in oil revenues, they remained a threat to the long term stability of the Saudi regime.

The third major power in the Gulf was Iraq. The US had backed the Ba'athists in the 1960s in order to prevent the Iraqi Communist Party from taking power. However, once the Ba'athists had consolidated power, they began to adopt a policy of state-led national development that followed the nationalisation of the oil industry in 1971. As a result the Ba'ath government in the 1970s gained the support of the Iraqi Communist Party, which still remained the largest party in the country, and increasingly became aligned with the USSR. Hence, following the Iranian Revolution, of the three major powers in the Gulf, two were avowedly hostile to the West and one, Saudi Arabia, while pro-western, was potentially unstable.

However, there was little to unite the pan-Islamic regime of Iran with the pan-Arab modernising regime in Iraq. On coming to power Saddam Hussein took the opportunity of Iran's disarray following its revolution to launch an attack ostensibly in order to regain territory that had been lost earlier in the decade to the Shah. This was to lead to the first Gulf War of 1981-88, which was to last for eight years and leave an estimated one million dead.

The US took the opportunity of backing the 'lesser evil' of Saddam Hussein in a war that served to contain both Iran and Iraq. Crucially it also served to reduce the supply of both Iraqi and Iranian oil on to the world market at a time when the oil shortage of the 1970s had given way to the oil glut of the 1980s, which threatened to lead to a collapse in the price that would wipe out the American high cost oil industry. Indeed, for the US it became advantageous to prolong the war, and as the Iran-contra scandal revealed, the Americans were quite prepared to supply arms to both sides.

For Saddam Hussein the war provided a perfect means to consolidate his newly established position as leader both within the potentially factious Ba'athist party and within the country as a whole. The imperatives of war allowed Saddam Hussein to ruthlessly crush both opposition within his own Ba'athist Party and to destroy the organisation of the Communist Party that had by now become completely compromised by its support for the regime and its commitment to nationalism. With the mobilisation for war Saddam Hussein was able to militarise society by bringing a vast proportion of the working class under direct military discipline. Trade Unions and other organisations of 'civil society', which had been dominated by the Iraqi Communist Party, were integrated within the party-state.

However, after Iraq's early successes, the war became bogged down. Opposition to the regime manifested itself in the form of mass desertions, particularly in those areas like Kurdistan that were distant from Baghdad. With falling army morale the tide of war began to turn against Iraq and Saddam Hussein became increasingly reliant on the support of the US. In order to repulse repeated offensives by the Iranian army Saddam Hussein resorted to chemical and biological weapons, importing the necessary materials from the West, and the US had no objections, not only against Iranian forces but also against Iraq's own deserters.

In the face of mass desertions and mutinies within the Iraqi army it was clear that even with the use of chemical and biological weapons and US military intelligence Iraq could not withstand Iranian assaults in the long term. In 1988 the US intervened by bring warships into the Gulf in order to 'protect international shipping' and effectively destroyed the Iranian navy. This was sufficient to bring an exhausted Iran to the negotiating table.

After eight years of war both Iran and Iraq were left economically exhausted. Both countries were weighed down with debts and were left with a largely dilapidated oil industry. The situation was particularly acute for Iraq, which had run up vast debts with Saudi Arabia and other Gulf states, which had been more than willing to lend money to Iraq as a means to prevent the spread of the Iranian Revolution to their own populations.

The state-party patronage system, which served to keep Saddam Hussein in power, had come to depend on the nationalised oil industry and the state control over its revenues. Therefore there was little scope for cutting a deal with the western oil companies, which would have involved relinquishing a certain amount of ownership and control in return for foreign investment to finance the reconstruction of Iraq's oil industry. Yet, saddled with debts and impoverished after eight years of war, the Iraqi state lacked the capital necessary for the reconstruction of its oil industry. Unable to expand production, its only hope to increase its oil revenue was for a rise in the price of oil. However, by 1988 the problem of the oil glut had become particularly acute.

The OPEC countries, led by Saudi Arabia, had sought to shore up the oil price by establishing production quotas for each member state. Yet, while it was in the interest of each state that all the other states abided by their quotas, there was always the temptation for each state to claim exceptional circumstances and produce more than their prescribed quota. Saudi Arabia as the largest producer, and in its role as the leader of the Arab world, had taken on the burden of compensating for the excess production of oil by other OPEC countries by restricting its own production. However, by the late 1980s its own pressing social and economic crisis was making the Saudi Arabian Government increasingly reluctant to sacrifice its own oil revenues for the sake of maintaining high oil prices on behalf of the rest of OPEC. Instead Saudi Arabia adopted a policy of allowing the oil price to fall sharply as a means of forcing the rest of OPEC to comply with agreed oil production quotas or face the consequence of a complete collapse in the price of oil. As a result the price of oil at one point dropped below $10 a barrel - a fall in part due to the increased production of oil from Iraq and Iran following the end of the war.

In such circumstance a confrontation with Kuwait offered an enticing prospect for the Iraqi regime. Within the Arab world Kuwait was widely blamed for undermining OPEC. Here was a country with a small population, which was cheating on its oil quotas, not in order to deal with serious social and economic problems, but merely to enrich an already bloated and decadent ruling elite. A confrontation with Kuwait could be presented as a blow struck for the Arab world as a whole, enhancing Saddam Hussein's prestige both at home and throughout the 'Arab nation'.

Furthermore, important oil fields straddled the Kuwaiti-Iraqi border. By increasing production from these oil fields, while Iraq was still recovering from the war and unable to expand its own production, Kuwait was in effect pumping out, and thereby stealing, 'Iraqi oil'. A diplomatic confrontation with Kuwait, backed up the willingness to use Iraq's overwhelming military force, would at the very least force Kuwait restrict its oil production and even allow Iraq to redraw its borders around these disputed oil fields.

Kuwait was militarily weak and diplomatically isolated in the Arab world. The only constraint on Iraq was the likely reaction of the US. However, Saddam Hussein had good reasons to expect the USA to keep out of any confrontation with Kuwait. Firstly, the US could be expected to be not too pleased with Kuwait for undermining OPEC's efforts to shore up the price of oil, which after all threatened economic viability of America's own oil industry. Secondly, Iraq had proved itself a useful ally in containing Iran and could at least expect the US to allow it some 'reward' for the sacrifices it had made during eight years of war.

As a consequence, in the Spring of 1990 Iraq re-opened long standing border disputes with Kuwait, and backed up this up by amassing troops on the Iraqi-Kuwaiti border. Indeed, the US did seem to turn a blind eye to Iraq belligerent attitude to Kuwait. In a meeting with Saddam Hussein the US ambassador, April Glaspie, was later reported as indicating that the US had no interest in border disputes between Iraq and Kuwait and as late as July Bush Snr. opposed moves by the US congress to take action against Iraq for its aggressive attitude towards Kuwait.[4]

Emboldened by the American's relaxed attitude Saddam Hussein made what seems to be a last minute decision to go for the complete annexation of Kuwait. On the 3rd of August 1990 the world woke up to find Saddam Hussein in control of 20% of the world's oil reserves and with little to stop him from attacking Saudi Arabia and taking another 20%. While the US, and indeed the rest of the Arab world, had been prepared to turn a blind eye to Saddam Hussein sabre rattling against Kuwait and would have even countenanced a limited military incursion to impose a de facto redrawing of the Iraqi-Kuwaiti border, a full-scale invasion was another matter.

No doubt Saddam Hussein had banked on the fact that the US would be reluctant to carry out the huge and unprecedented military operation that would be necessary to evict Iraqi forces already established in Kuwait. However, in doing so Saddam Hussein had failed to take account of the impact on US foreign policy of the rapidly changing situation at a global level. By the Summer of 1990 it had become clear that the USSR was rapidly disintegrating and could no longer act as a world power. As we have already pointed out, the alarm over Iraq's invasion provided the perfect opportunity to mobilise the American and Western bourgeoisie around a multilateralist interventionalist policy that was to be enshrined in Bush Snr's New World Order.

After months of preparations the coalition forces took no chances in operation 'Desert Storm'. With total air supremacy the coalition forces began with a six weeks bombing campaign. The Iraqi army positions were carpet-bombed while the country's infrastructure - roads, sewage plants, electricity power stations etc. - was systematically destroyed. An estimated 100,000-200,000 Iraqi troops were slaughtered and tens of thousands of civilians died either directly in the bombing or through the spread of diseases due to lack of clean water.

With morale destroyed by six weeks of incessant bombing the advance of coalition ground forces met with little resistance. Iraqi army conscripts deserted en masse at the first opportunity and uprisings broke out in the Kurdish north and in the south of Iraq. Saddam Hussein's regime was on the point of collapse.

However, facing the prospect of either allowing the disintegration of Iraq, which could only be to Iran's advantage, or else committing itself to a full scale occupation of Iraq, which would involve putting down the uprisings, the US decided to pull back. The invasion of Iraq was halted and every effort was made to shore up the Iraqi regime. Fearing that deserting Iraqi conscripts would join up with the uprisings in the South the USAF and RAF directed to bomb them as they fled the front-lines, leading to the infamous 'massacre on the road to Basra'. In terms of the cease fire agreed with Saddam Hussein, all Iraqi aircraft were grounded except the helicopters necessary to put down insurgents. The coalition forces then stood by while Saddam Hussein loyal republican guards ruthlessly crushed the uprisings. As the recent uncovering of mass graves testify, thousands of insurgents in the south were executed, while in the North thousands more died of cold and hunger after fleeing into the mountains on the Turkish border.

It was only in May, weeks after the end of the war, that the 'no fly zones' were introduced to protect the 'Kurds in the North and Shiites in the South'. By then the insurrections, which had taken on a distinctly proletarian character, had been crushed, allowing the US and Britain to promote a nationalist and religious opposition the Saddam Hussein.[5]

For the Western powers as a whole, it was now clear that Saddam Hussein had proved to be an unpredictable leader who, if left unchecked, could act to destabilise the middle east and threaten the security of the world's oil supplies. Having kept Saddam Hussein in power the question arose as to how to contain him without impairing his ability to act as a counter-weight to neighbouring Iran.

The answer offered by the US, backed by Britain, was to impose economic sanctions on the pretext that Iraq possessed unauthorised weapons of mass destruction. Iraq would still be able to maintain its army and conventional weapons but punitive sanctions would be imposed until it could be verified by UN inspectors that all 'weapons of mass destruction' were destroyed. It was argued that under such pressure either Saddam Hussein would be brought to heel or else he would be eventually replaced by a more amenable leader of Iraq. Hence eventually Iraq could be 'readmitted into the international (bourgeois) community'.

Of course, for the US and Britain sanctions had the additional advantage of keeping Iraqi oil off the world market. Not only was Iraq forbidden to export oil without UN authorisation, it was unable to import the spare parts necessary to maintain oil production.

By repeatedly insisting on moving the goal posts concerning the weapons inspections the US was able to prolong sanctions throughout most of the 1990s. However, the policy of using sanctions to contain Iraq depended on support of the other great powers and a commitment on the part of the US to multilateralism. By the end of the 1990s this was coming into question.

Fears that the fall of the USSR would lead both to the break up of the western world into competing trade blocs and to the decline of the USA were to prove a little premature. In Japan the financial bubble of the 1980s burst, exposing the underlying weakness of Japanese capital. Weighed down by enormous 'non-performing' debts the Japanese economy entered a prolonged period of stagnation from which it has yet to recover. In Europe the brief boom that followed German re-unification in the early 1990s was to be followed by nearly a decade of slow growth. In contrast, the US in the 1990s was able to reassert itself as the central pole of global capital accumulation.

By the mid-1990s it had become clear that the Reaganomics of the early 1980s had assisted a major restructuring of the American economy. The over-valued dollar and high interest rates had hastened the shift away from the long established manufacturing industries of the North and East, as these industries were forced either to rationalise or relocate outside the US. At the same time the huge military expenditure acted as substantial subsidy for the research and development necessary to establish the new information and communication technologies (ICTs) that were to become decisive in 1990s.

This restructuring of US capital necessarily involved a decisive defeat of the American working class. The highly paid and organised car workers of Detroit faced compliance with the new 'flexible' working practices demanded by 'lean production', or the relocation of their jobs to Mexico or South Korea. The 'new economy' required highly skilled and educated computer programmers and software engineers - although often on short term contracts - but it also could depend on cheap, often illegal, immigrant labour from across the Mexican border to undertake the growing profusion of McJobs. Cuts in welfare, continued well into the 1990s under Clinton, increased the competition on those in work from the industrial reserve army of unemployed. As a result, American capital was able to hold down wages and ensure that it had a flexible and compliant workforce.

With greater 'labour flexibility' American capital could take full advantage of the 'just in time' production, computerised stock control and total quality control methods, which had been made possible by the new information technologies, and that served to raise the rate of profit by speeding up the turnover of capital. At the same time, American capital succeeded in making American workers work more hours for the same pay increasing absolute production of surplus value, and with this the rate of profit As a result, after nearly twenty years of decline, the profitability of US capital had begun to steadily increase from the mid-1980s.

This revival of the profitability of American capital served to sustain the large inflows of money-capital into the U.S. that had originally arisen to finance the huge budget deficits of the Reagan years. But increasingly these inflows were not so much concerned with appropriating the interest payments made on government debt issued to bridge the Federal Government's budget deficit, but to buy a share in the rising profitability of American capital. By the late 1990s the inflows of money-capital were more than enough to finance the chronic trade deficit that had arisen from the decimation of US manufacturing industry under Reagan, leaving a substantial 'investment surplus'. This 'investment surplus' was channelled through the sophisticated and well-connected American financial system to take advantage of the opportunities offered by the newly emerging market economies of Asia, Eastern Europe and South America.

As a result, the strong revival of the profitability of American capital, particularly relative to its main competitors, served to reassert the USA's position as the central pole of world capital accumulation. For the newly 'unified bourgeoisie' across the globe, the US was were the money was to be made. Its expanding domestic markets provided opportunities for manufacturers across the world to sell their products. Its sophisticated and well-connected financial system, protected by the US state, offered good returns for the world's investors and speculators. The control, if not the ownership, of the capital of the world was being increasingly concentrated in the USA and Wall Street.

The emergence of a unified global capitalism centred on the USA provided the basis that was necessary to sustain New World Order, which had been proclaimed by Bush Snr at the onset of the Second Gulf War of 1991. In this new order, the old multilateral organisations of the Cold War - the United Nations, NATO, The World Bank, IMF - had been revamped, and together with newly established ones such as the World Trade Organisation, were to act as nodes in a new rules based system of global governance. This new rules-based system served to contain the imperialist rivalries of the great powers and ensure 'a level playing field' for competing capitals of different national affiliations. The various multilateral organisations served both to enforce these rules and to act as forums through which global policies could be formulated and implemented to address common economic and political problems that faced the world's bourgeoisie as a whole.

The US was to play the leading role in the New World Order. As the first among equals, and the main source of funds for these multilateral organisations of global governance, the US had a determining influence in the drawing up of the international rules. The US, of course, was obliged to abide by these rules, and often was obliged pursue its foreign policy objectives through lengthy diplomacy and negotiations with the multilateral organisations. However, in return the other great powers were obliged to share the military and economic burdens required in defending and extending global capitalism, particularly against those 'rogue states' that still refused to accept the wonders of neo-liberalism.

However, by the late 1990s the New World Order and the US's multilateral foreign policy began to reach its limits.

For Bush Snr, the New World Order had emerged as a means to resolve the central dilemma of American foreign policy in the post-Cold War era. How was the USA to police the world without incurring unsustainable military costs? The answer, as we have seen, was that in return for consultation and a commitment to commonly agreed rules the other great economic and military powers would share the burden of maintaining the conditions necessary for capital accumulation across the world.

At first the reassertion of the US as the central pole of global capital accumulation had served to sustain the New World Order. The recovery of the American economy from the recession of the early 1990s dragged the rest of the world developed economies behind it. As the US became the main centre for investment and speculative opportunities large swathes of the bourgeoisie in both Europe and in the periphery developed interests in the US economy and sought to emulate its success by advocating neo-liberal policies at home. This pro-American orientation of large parts of the bourgeoisie outside the USA meant that the US state could act, in concert with the international organisations of 'global governance, as the prime representative of the interests of the newly emerging 'global bourgeoisie'.

However, this very economic resurgence of the US also served to give added weight to the disadvantages of a multilateralist foreign policy for the American bourgeoisie.

Firstly, by the end of the 1990s there were growing concerns among sections of the American bourgeoisie that the Europeans were becoming increasingly adept at tying America down through a series of international treaties that threatened to seriously damage US economic superiority. From the Kyoto agreement on global warming, which required large cuts in carbon emissions from the USA, through the restrictions Europe imposed on bio-technology with its opposition to GM foods, to various trade disputes, European capital could seen to be taking advantage of America's compliance with the rules of international diplomacy.

Secondly, while America delivered its side of the bargain, the other great powers, particularly those in Europe, were failing to deliver their side. Europe proved both unable to develop a common and coherent foreign policy, and unwilling to increase its spending on defence. As a result, Europe as a whole was unable to take up its full share of the military and diplomatic burden of policing the world.

At first, the failure of the European Union to formulate a common foreign policy had its advantages for the US. It meant that the European Union was unable to influence the transition of the former Eastern bloc from state capitalism. Proposals that the transition of former Eastern bloc countries should be towards some model of 'social market capitalism' did not last much beyond the fall of the Berlin Wall. Instead the policies of 'short sharp shock', of rapid deregulation and privatisation, much favoured by US and global financial capital, were placed at the top of the agenda. The only question allowed was how short and how sharp these shock policies should be in the varying economies concerned. Of course, these 'shock therapies' tended to last much longer than expected and led to disastrous results for the majority of people in the former Eastern bloc. However, they also created a new pro-American and neo-liberal orientated bourgeoisie in these countries, as wealth became concentrated in the hands of a few - forming the basis of what was to become the 'new Europe' of Rumsfeld.

But the European Union's failure to develop a common European foreign policy, due to the continued rivalries between its great powers, also meant that it was unable to take up it role in defending the New World Order. This became evident in the case of the disintegration of Yugoslavia. It was rivalries between the European powers that had precipitated the war between Croatia and Serbia and then to the Bosnian war in the first place; and it was these rivalries that blocked the European Union's attempts to intervene and impose a solution. As a result, the US had been obliged, rather reluctantly, to intervene and commit its own troops to impose its peace. For many in the American bourgeoisie, the example of Yugoslavia showed all too well that their fractious and gutless European brothers were incapable of even policing their own back-yard let alone aiding America in its global responsibilities.

The financial crisis the broke out in Asia in 1987-8 punctured the appetite of American capital for investments in 'newly emerging market economies'. Japan remained locked in chronic stagnation and the European bourgeoisie had made little headway in pushing back its entrenched working class. The 'investment surplus' that had flooded into the 'newly emerging economies' now turned to the US itself, creating the beginnings of what was to become the Dot.Com boom. Amidst the euphoria that surround the so-called new weightless economy that could defy all the previously known economic laws of gravity, it could appear that the US had little need of the rest of the world. America was were the profits and action was and the rest of the world would either have to keep up or go the wall.

The general tenor of the growing criticisms of the established multilateralist American foreign policy, with its now almost regular commitment to Clintonite 'humanitarian wars', was decidedly isolationist. However, amongst the growing opposition to the orthodox American foreign policy, there emerged a distinct strand of more far sighted and outward looking strategic thinkers who were to become known as the neo-conservatives.

For the neo-conservatives, America could not ignore the rest of the world - it had to dominate the rest of the world or else be eventually dominated by some other power in the world. But if the USA was to maintain its global hegemony in the long term it could not simply rely on its current economic superiority. On the contrary, it had to assert its political and military power in order to shape the world in its own interests. America needed to secure the supply of strategic commodities into the future, it needed to prise open the economies of central Asia that still remained impervious to American capital, and it had to nip potential military and economic rivals in the bud.[6]

However, to pursue such an aggressive foreign policy had two important implications, as the neo-conservatives were well aware. Firstly, on a diplomatic level, an aggressive pursuit of American interests across the globe would inevitably come into conflict with the interests of its 'allies'. The US would therefore have to throw off the encumbrances and entanglements of the multilateralism that had evolved out of the Cold War under Bush Snr and Bill Clinton.

Secondly, the neo-conservatives recognised that there had to be a major re-think of military strategy. Against the orthodox military thinking of the generals, which stressed the need for overwhelming force, the neo-conservatives called for the deployment of smaller more flexible forces using more selective 'smart' weapons. Not only would the deployment of smaller forces be far more rapid, but they would be far cheaper. As a result the costs of 'policing of the world' could be substantially reduced.

However, as the neo-conservatives were well aware, the deployment of smaller forces would also carry far more risk of high casualties if things went wrong. If their new military strategy was to work the ghost of Vietnam that still haunted the American bourgeoisie and the American high command had to be exorcised. After all, insubordination verging on mutiny against the Vietnam war had come at a high point in working class struggles in the US - now that the American working class had been more or less pacified fears that military involvement would lead to 'another Vietnam' remained little more than a spectre.

Although the neo-conservatives that were to rally around the Plan for A New American Century were well organised and held influential positions, they remained a largely marginal position. With the election of Bush Jnr the neo-conservatives captured important positions. However, in the first few months US policy appeared to be taking a more isolationist direction, rather than that of an aggressive unilateralism advocated by the neo-conservatives. But once again it was oil that trumped the isolationist case. With the explosion of the Twin Towers impressed once again the importance of the Middle East to the US economy and 'way of life'. And the neo-conservative agenda became the order of the day.

The immediate fundamental problem facing the oil industry in the 1980s and 1990s was that the world's capacity to produce oil was growing faster than the world's consumption of oil. Whereas the 1970s had been an era of oil shortage the following decades were to be an era of an oil glut. But by the mid-1990s the more strategic thinkers of the bourgeoisie, particularly those within the oil industry, were becoming concerned that in the not too distant future the world could once again find itself facing an acute oil shortage and find itself increasingly dependent on anti-western governments in the Gulf.

Firstly, by the 1990s it was becoming clear that the rate of discovery of new potential oil fields was falling rapidly. Chronically low oil prices meant that there was little incentive to find new sources of oil. Also most of the most likely areas for the discovery of oil had already been searched. Secondly, and perhaps more importantly, the non-OPEC fields that had come on tap after the 'oil price shocks' of the 1970s, most notably those in the North Sea and Alaska, were reaching the end of their peak of production and were about to enter a period of decline. As a consequence, with continued economic growth increasing the demand for oil it was predicted that the West would become increasingly dependent on oil from the middle east and could face an oil crisis as soon as the year 2010.[7]

These fears that the current oil glut would give way to an oil shortage in perhaps little more than a decade had a decided influence on the evolution of US foreign policy towards the Gulf states and brought about a two-pronged approach. Firstly, it became clear that the policy of containment towards both Iraq and Iran would have to be brought to a conclusion in the medium term by bringing them back into the fold of the 'international (bourgeois) community'. Secondly, it was hoped that this policy of rehabilitation of these oil rich 'rogue Gulf states' could be complemented by developing the oil fields in Africa and the former USSR and by developing alternatives to oil such as natural gas and the 'hydrogen economy'.

However, there were major problems facing such a response to the future threat of a new oil crisis. Although all the main capitalist powers had an interest in maintaining a secure and reliable source of oil and, as a consequence, had fully supported the policy of containment of both Iraq and Iran, there was a distinct division of interests concerning how such containment should be brought to an end, particularly as regards Iraq. For the high-cost oil producers, the UK and the US, it had been important to keep as much Iraqi oil off the world market as possible in the short term in order to shore up the oil price. Not only had the US and the UK led the war on Iraq in the first place but had also been the prime advocates of maintaining punitive sanctions in the decade after the Second Gulf War of 1991. However, the mainly oil-consuming nations, such France and Germany, were far less concerned with falling oil prices in the short term. Indeed, much to the chagrin of the Americans, the French and Germans, joined also by the Russians, increasingly began to exploit the resolute adherence of British and American firms to maintaining sanctions on Iraq to steal a march on their competitors by doing back door deals with the Iraqi regime in the hope of gaining privileged access to the development of Iraqi oil in the future when sanctions were lifted.

By 1998, after seven years of UN inspections, it was becoming clear that Iraq had been disarmed of its so-called 'weapons of mass destruction'. Facing the end of its sole justification of sanctions that kept Iraqi oil off the world market, the US, on the pretext of a dispute concerning the numbers of inspectors allowed into the so-called Presidential Palaces, ordered the withdrawal of all UN weapons inspectors and launched a four day bombing campaign of Iraq. Then, backed by its faithful ally Britain, the US repeatedly blocked any attempt to allow the return of the UN weapon inspectors. There then emerged a stalemate over Iraq. By stalling the return of weapons inspectors the US and Britain were able to prevent the lifting of sanctions against Iraq and prevent the French, Germans and Russians gaining a head start in the race for Iraqi oil. But at the same time attempts to shore up sanctions against Iraq, which were becoming increasingly ignored, only served to lock out British and American firms.

The main hope for reducing reliance on the Gulf states was the development of the vast oil and natural gas fields surrounding the Caspian Sea. But most of these fields belonged to the former USSR. This meant that not only did they fall under the sphere of influence of the Russian state but also only existing ways of piping the oil to the west lay through Russia. Following the privatisation of the Russian oil and gas industries under Yeltsin the ownership had become concentrated into the hands of a few very power 'oligarchs'. With the strengthening of the Russian state with Putin, it became clear that the both the oligarchs and the Russian state would insist on driving a hard bargain with West for the extraction of oil and gas from central Asia.

Of course, it was feasible to pipe oil and gas from Caspian Sea via routes that did not go through Russia. Geographically Iran was the obvious way of piping Caspian oil out but this was not on, for obvious political reasons. The other alternatives were: through the Caucuses and then via Turkey or the Balkans, or through Afghanistan. However, all these routes involved very long pipelines running through potentially unstable countries and involved high development costs. As a consequence, such plans were to remain largely speculative, being used mainly as a bargaining chip to extract concessions from the Russians.

However, even if the Western oil companies were able to gain access to Caspian oil and gas on reasonable terms from the Russians the problem remained that the costs of developing these relatively untapped fields would be very high and eventually operating costs would be far higher than those of the Gulf states. As a consequence, there were considerable doubts as to whether Caspian oil fields could replace Saudi Arabia, or the other Gulf states, as the 'swing producer' that could regulate the price of oil by increasing or decreasing its scale of production.

For the neo-conservative critics of the multilateral foreign policies of the Clinton era, the two-pronged strategy of dealing with the problem of a future oil shortage and America's increasing reliance on the Gulf states had become bogged down. At best they would require time to work but for the neo-conservatives time was running out. Pointing to the instability of Saudi Arabia the neo-conservatives warned that the US may well wake up to find that all the states on the Gulf would have become anti-American and, with the onset of an oil shortage, these states would be able to hold the US, and indeed the entire West, to ransom!

For the neo-conservatives it was necessary to cut through all the diplomatic niceties of multilateralism and directly intervene in the Middle East in order to reshape it in America's interests while it was still possible to do so. For the neo-conservatives the fall of the USSR had opened up the possibility for the US to restructure the Middle East and the Gulf states with the Second Gulf War of 1991 but Bush Snr had lost his nerve and had bottled out. As such Iraq was unfinished business.

An invasion of Iraq would not only allow the US to appropriate the second largest proven oil reserves in the world, it would also show in no uncertain terms that the USA was willing and able to impose a 'regime change' anywhere in the world. American troops could be withdrawn from Saudi Arabia but, with bases in Iraq, America could intervene in when ever necessary.

At the same time, America would be in a better position to put pressure on Iran. Iran is the great prize for the neo-conservative project. Not only has it been a great thorn in the side of US foreign policy since the since the overthrow of the Shah, it also has undeveloped oil reserves almost equal to those of Iraq. Iran is also well placed geographically. Not only does it command the Persian Gulf but also borders the Caspian Sea. Iran is perfectly placed to provide an outlet for the vast oil and natural gas fields of central Asia that would otherwise have to pass through Russia.

During their years in the political wilderness the neo-conservatives could only despair at the continued complacency and inertia of US foreign. As the neo-conservatives admitted, it was felt that only a event on the scale of Japan's attack on Pearl Harbour in 1942 would be sufficient to mobilise the American bourgeoisie around the neo-conservative agenda. As we have already noted, although the neo-conservatives were able to capture key positions in Bush Jnr's new administration, and although they had the backing of influential interests both in the military-industrial complex and oil industry, the neo-conservatives remained a minor voice in the formation of US foreign policy. Faced with what they saw as the 'liberal pessimism' of the state department, and an overcautious and conservative military high command on one-side, and the head-in-the sand isolationist tendencies within the Republican Party on the other, it seemed in the first few months of Bush Jnr's Presidency that the neo-conservatives would remain as prisoners within the Bush administration and the political establishment.

However, the events of September 11th 2001 came to the rescue. In the midst of the hysteria that was whipped up following the attack on the Twin Towers the analogy with Pearl Harbour was firmly established. The USA was at war with an enemy all the more fearsome by the fact of it being amorphous and invisible. Petty particular interests had now to put to one side, so that the nation, indeed all the 'free world', could unite in the 'War on Terrorism'.[8] With the US bourgeoisie, and indeed much of the population, shocked out of their complacency, the Bush administration was able to seize the political initiative by adopting the neo-conservative agenda.

Within days of September 11th the more eager neo-conservatives were already pressing for a war on Iraq. However, it was soon accepted that an immediate attack on Afghanistan would be a useful detour and prelude to the remaking of the middle east with a war on Iraq. After all a war against Afghanistan could be far more easily sold to American public opinion than an immediate war on Iraq. There was not a shred evidence that linked the secularist Iraqi regime with Al Qaida, indeed it was well recognised that Bin Laden and Saddam Hussein were bitter enemies. In contrast, Afghanistan was sheltering the very master-mind of the attack on the Twin Towers.

In addition an invasion of a 'failed state' such as Afghanistan, which lacked even the semblance of a conventional army, could be launched in a matter of weeks, thereby maintaining the political momentum of the 'War on Terrorism'. In contrast, an invasion of Iraq could take months to prepare, allowing plenty of time for the effect of hyperbole surrounding September 11th to dissipate. For the neo-conservatives an invasion of Afghanistan would also have the advantage of allowing the US to gain both a toe-hold in Central Asia and to secure the eastern flank of Iran.

The easy victory in Afghanistan appeared to vindicate the neo-conservatives. Despite the dire warnings from the liberal faint-hearts that the US would follow both Britain and Russia in becoming mired in a prolonged guerrilla war in the mountains of Afghanistan, the invasion succeeded with few American casualties. Although thousands of Afghans died and millions were forced to flee their homes, the swift end to the war meant that humanitarian disaster of mass starvation over the winter, predicted by the UN and many NGOs and charities, failed to occur.

With America triumphant at the end of the war, Bush confirmed his administrations commitment to the neo-conservative agenda with his 'axis of evil' speech in January 2002. By the late Spring it was clear that the Bush administration had made the decision that US should invade Iraq. The only questions that remained amongst the competing factions within the Bush administration were how the war on Iraq should be fought and how it should be sold.

Over the Summer reports emerged concerning the various military plans for the invasion of Iraq as a compromise was hammered out between the neo-conservatives and the military high command of the American armed forces. Although they had been obliged to accept that war against Iraq was government policy, the American generals were concerned to squash the high risk plans of Rumsfeld's protégées and whizz kids for a rapid precision attack, using elite and special forces, that would aim to decapitate the Iraqi regime and paralyse its armed forces. They insisted on the use of overwhelming force using substantial ground forces backed massive air support that would take months to assemble. However, while they succeeded in scuppering the more radical military plans put forward by the neo-conservatives, the American generals were obliged to make substantial revisions to established military doctrines.

On the diplomatic front the question was what should be the pretext of war and under what banner should it be fought. For the neo-conservatives the war on Iraq should be presented as simply the extension of the 'War on Terrorism'. The USA should cut through all the encumbrances of multilateralism and lead a coalition of the willing to overthrow the Iraqi regime.[9] For the opponents of the neo-conservatives in the Bush administration, who recognised the propaganda difficulties in linking Iraq with Al Qaida and who feared the consequences of such reckless action that might well destabilise the Middle East and cause a serious split amongst the great powers, the pretext for war should be the long standing issue of Iraq's alleged possession of 'weapons of mass destruction'. This pretext would inevitably reactivate the UN process of weapons inspections and draw the US into a multilateralist approach by involving the other great powers through the UN. In this way any negative consequences of an invasion of Iraq could be minimised.

With the generals insisting on a major build up of forces that could take months, the arguments for at least giving diplomacy a chance were able to gain ground. With a war pencilled in for Winter there was more than six months to bring the great powers on board for a UN sanctioned operation. However, perhaps the decisive consideration that tipped the balance against the neo-conservatives favoured option for unilateral action and for going down the UN route was the approach of the mid-term congressional elections.

There is perhaps little doubt that there was large swathes of the American bourgeoisie, together with much of the foreign policy establishment, that were concerned with Bush Jnr's adoption of the neo-conservative agenda. However, the obvious vehicle for their opposition to the governments new foreign policy was the Democratic Party. But, after September 11th, the Democrats were afraid to put their heads above the parapet for fear of being accused of being unpatriotic. Instead they maintained an uncritical bipartisan approach on foreign policy and, from an early date, had decided to fight the mid-term elections on the 'perilous state of the economy'.

Given the collapse of the Dot.com boom and rapidly rising unemployment the Republican's best bet was to try and keep the debate on foreign policy and the threat of 'international terrorism'. Yet if they succeeded in making foreign policy the central issue of the campaign they risked the Democrats taking up a position of 'loyal opposition' by accepting the aims but criticising the way the Bush administration was going about achieving them. By adopting the UN route, under the pretext of Iraq's weapons of mass destruction, the Republican's could capture the centre ground and prevent the Democrats from accusing the Bush administration of being reckless and putting the USA out on a limb in the 'international community'. In addition it allowed Bush to present himself as a World Statesmen, as CNN showed almost nightly footage of the President meeting the world's leaders over matters of war and peace.

However, the adoption of the UN route the US had to bring the other great powers on board, particularly those that had veto powers on the Security Council. Of course, the US had a willing ally in Tony Blair.

In the build up to the war on Iraq Tony Blair was aptly caricatured as Bush's poodle. However, in aligning himself so closely with the US, Tony Blair was only taking a long standing feature of British foreign policy to its logical conclusion. Ever since the end of the Second World War Britain has sought to act as the junior partner to the US and as its bridge to Europe. With respect to the Middle East, ever since the Suez debacle in 1956 Britain has not attempted to develop a policy that was at variance with that of the USA. But this commitment and faith in the 'special relationship' with the USA has not been the result of some failings of successive British governments but an expression of common and convergent interest between British and American capital.

Like the US, Britain is not only a major consumer of oil it is also one of the main producers of oil outside OPEC. It is the domicile of two of the oil majors, BP and Shell, that have global interests in the production of oil and have maintained close contacts with both Conservative and Labour Governments. Also, like America, Britain is a major arms producer. Over 10% of Britain's remaining manufacturing output is defence related and the military continues to gobble up half of Britain's research and development funding.

However, more generally, the major restructuring of British capitalism, which began under Thatcher, has left Britain crucially dependent on the earnings of the City of London and the financial sector. With the decline of her manufacturing, Britain has found a unique niche for itself with the emergence of global financial capital as a conduit channelling money-capital from across the world into the US financial system. However, British capital's ability to cream off surplus-value from the huge capital flows that pass through London depends crucially on the continuation of the tendency for the free movement of capital and the implementation of neo-liberal economic policies across the world. It also depends, as Tony Blair is no doubt painfully aware, on the continuation the multilateral system of rule based global governance that is necessary to manage, defend and indeed extend this world economic system based around global finance capital.

Therefore the prime imperative British foreign policy, particularly in the last decade, has been to uphold the New World Order of multilateral world governance and to support America insofar as it is the only power capable of maintaining this New World Order. This has given rise to a close adherence to the doctrines of Cosmopolitan Liberalism and 'Liberal humanitarian imperialism' that have become the hall-marks of new Labour's foreign policy, leading Blair to fight five 'humanitarian wars' in less than six years in office!

Bush Jnr's election on a decidedly isolationist platform posed a serious threat to British foreign policy. Blair decided early on to make a special effort to develop a strong relation with the Bush administration in an effort to bolster its more cautious and multilateralist factions perhaps most clearly represented by Colin Powell. This policy proved so successful that Blairites were able to boast during the run up to the war that the British government was a distinct voice within the policy making process of the Bush administration.

However, by the Summer of 2002 being on the inside of the policy making process of the American government meant, at least tacitly, accepting the inevitability of war. Colin Powell may have been far less hawkish than the super-hawks like Rumsfeld but he was nevertheless still a hawk. Further, if his advice of taking the UN route was to be listened to, Blair had to put his political reputation on the line and bring on board the other main players in the United Nations. As a consequence, Blair became Bush's travelling salesman selling the prospects of war on Iraq across the capitals of Europe and the middle east.

The main obstacles facing Blair's efforts to secure a UN resolution giving authorisation for a war on Iraq were France and Russia, who, as permanent members of the Security Council, could veto any such resolution. The American policy of forcing a regime change in Iraq threatened to reduce to zero France's efforts to steal a march on the American's in gaining access to Iraqi oil. However, the French government was reluctant to directly oppose the US on this issue. Instead they hoped that through prolonged negotiations over the UN resolution and the shape and remit of the subsequent weapons inspections to mire the Americans in endless process of diplomacy. With sufficient procrastination the window of opportunity for launching an attack on Iraq would be passed and it could be hope that the Americans' enthusiasm for war might begin to wane. Failing this, negotiations over the UN resolution could be used as a means to extract compensation for any losses they might incur following an American led invasion of Iraq and the establishment of a pro-American Iraqi government.

Russia was in a far weaker position than France, being dependent to a large degree on American good-will to finance its huge debts, particularly with the IMF. However, it also had much more to lose than France. With its largely decrepit and uncompetitive industry, oil and gas are amongst Russia's few commodities that rest of the world is eager to buy. As we have seen, so long as Iran and Iraq remained as 'rogue states', the vast but undeveloped oil and gas fields of Central Asia were an attractive alternative to the continued reliance on a potentially unstable Saudi Arabia. In order to hedge against the possibility of Iraq and Iran being re-admitted to the 'international (bourgeoisie) community', Russia had developed close contacts with the current regimes and had followed France in making back-door deals that would aid their future access to their oil fields. However, a US invasion of Iraq, particularly if followed by the overthrow of regime in Iran, threatened to seriously undermine Russia's bargaining position with the western oil companies over the access, extraction and development of the oil and gas fields in Central Asia. It also threatened to undo the deals done with the current Iraqi and Iranian governments. As a consequence, Russia hid behind France's position towards the UN resolution.

Following the mid-term Congressional elections the hawks position was strengthened. It soon became clear that any further procrastination on the part of the French would only serve to further strengthen the arguments of the neo-conservatives for the US to give up the UN route and lead a coalition of the willing. Hence, weeks of protracted negotiations were brought to a close by France making crucial concessions. Firstly, France all but accepted that a 'serious breach' of what was to become Resolution 1441 would be sufficient cause for the US to lead a military invasion of Iraq without the authorisation of a second resolution. Secondly, France conceded that strict provisions would be included in the resolution. The weapons inspections would be given a strict dead-line to make its first report. The Iraqi regime was to make a final and complete declaration concerning its possession of 'weapons of mass destruction' so that any proscribed weapons, or weapons production capacity, found after the declaration would count as a 'serious breach' of the resolution. Furthermore, the Iraqi government was under an obligation to fully co-operate with the UN weapons inspectors.

However, while France concede that a 'serious breach' of Resolution 1441 would warrant military action, France secured crucial concessions in return concerning how it was to be decided that such a 'serious breach' had occurred. Firstly, France was able to secure that the UN weapons inspections would be based on the rules, procedures and personnel already established by the UN. Secondly, France was able to ensure that the weapons inspectors should be led by Hans Blix, whose previous record with the International Atomic Energy Authority had led many in the US administration to regard him as a soft touch for the Iraqis. Thirdly, France secured America's agreement that the weapons inspectors should report back directly to the Security Council. This implied that any decision to go to war had to be taken in consultation within the UN. If the US insisted on going to war it would have to present its case openly to whole world.

At this point, France could still hope, if not to dissipate the drive to war, still sell its veto for a slice of the spoils of war, particularly if the US was unable to come up with a convincing breach of Resolution 1441. Indeed, as late as January Chirac was still preparing to send French troops to fight in the American led coalition against Iraq.

However, once the military build up in the Middle East began to gather momentum after Christmas, the neo-conservatives could count on the support of the Army high command to argue that diplomacy should be subordinated to military imperatives. Once the huge logistical exercise in transporting 150,000 troops to the Gulf, together with all their supplies and equipment, had been completed there was to be little time for delay. The military high command did not want to deal with the problems of both morale and logistics of maintaining such a large military force poised on the borders of Iraq waiting for action while diplomats and weapons inspectors wrangled over the meaning of certain words and evidence. But more importantly the US military were anxious to invade before the onset of the Iraq Summer. The war had to be begun before the end of March.

Although the neo-conservatives had been obliged to play along with the diplomacy of the UN they were able to insist that once the troops were ready the war must begin, and that there would be no material concessions to the Europeans over the spoils of war.

Faced with the intransigence of the US on the one side, and the unprecedented world-wide opposition to war on the other, European leaders had little to lose and much to gain politically, both amongst their own electorate and in the Arab world, by opposing the march to war. In January Germany took up its turn as a non-permanent member of the Security Council. With both Britain's and the USA's pathetic attempts to find evidence of Iraq's 'weapons of mass destruction', and bolstered by Germany's presence on the Security Council, both France and Russia moved towards open opposition to American war plans. By the time the coalition troops were ready there was not even a majority on UN Security Council prepared to support a 'Second Resolution' sanctioning war.

Although the neo-conservatives within the Bush administration had been obliged to swallow the UN route to war it had in the end made little difference. The first item on their agenda - the invasion of Iraq - had been achieved. For the multilateralist in the Bush administration it could be claimed that the war had been sanctioned by Resolution 1441 and the New World Order had remained intact. For the European powers opposed to war had at least shown they were no poodles of US imperialism and had improved their standing both at home and in the Arab world. The main loser, apart of course for the thousands who were going to be killed and maimed in the war, was Tony Blair.

Blair had staked his political reputation, both at home and abroad, on securing a Second a UN resolution. For Blair a second resolution would cement the unity of the 'international (bourgeois) community' behind American leadership and convince the Bush administration of the efficacy of staying within multilateralism of the New World Order. At home, the prospect of a Second Resolution provided a rallying point against the mass popular opposition to the war.

Blair's eventual complete failure to obtain a Second Resolution, despite being given more time by the delays in the military build up, meant Blair's entire policy had backfired. The rifts in the 'international (bourgeois) community' were exposed and exacerbated. In his desperation to outflank the Germans and French, Blair was obliged to open up divisions between what Rumsfeld was to describe the New and Old Europe. And at home Blair had to lie and dissemble in the face an unprecedented revolt within his own Party.

As with the war in Afghanistan, the war in Iraq ended with the apparent vindication of the neo-conservatives' unilateralist policies.

The military critics of the war against Iraq had warned of the dangers of the coalition forces being dragged into a long conflict that would mean fighting during the heat of the Iraqi Summer. They had warned of the untested mettle of the Saddam Hussein's elite forces - the Republican Guard and the Special Republican Guard - and they had warned that the coalition's technological supremacy would count for little if it came to capturing Baghdad street by street. For the war's humanitarian critics, it was feared that the war would be like that of 1991: tens of thousands of Iraqi civilians would be killed and many more would be forced to flee their homes. The infrastructure of Iraq would be further destroyed creating the conditions for another 'humanitarian disaster'. For the war's geo-political critics, the war on Iraq would inflame the 'Arab world', which would threaten the stability of the Middle East.

However, despite a few wobbles, exaggerated out of all proportion by the 'embedded media', the war went more or less according to plan. The war was over in less than three weeks. Uncertain of the loyalty of much of his elite forces Saddam Hussein had been obliged to deploy them outside Baghdad where they had been little more than sitting ducks for the American air force. While the resistance to the American advances in to Baghdad soon crumbled. The targeted and precision attacks of the coalition forces minimised both civilian casualties and damage to Iraq's infrastructure.[10] There was neither a mass exodus of refugees nor was there a humanitarian disaster on the scale of 1991.

While there were major demonstrations through out the Middle East and Middle Eastern governments were obliged to tread very warily in giving any support to the US war effort, no government came close to being overthrown. Indeed, to the extent that the it allowed Arab governments to take up an anti-American posture and divert attention away from their own social problems, it could be argued that the war aided in the maintaining the stability of the Middle East region.

However, while the war went according to plan the same can not be said for the 'peace' that followed. Perhaps in order to minimise dissensions both within the Bush administration and between America and its allies, the main focus of planning for the invasion of Iraq concentrated on the one set of objectives around which all could agree - the need to ensure a swift and decisive victory with the minimum of coalition causalities. Far less effort appears to have been spent by war-mongers in Washington in drawing up a plan for post-war Iraq. Indeed, what planning there was seems to have been based more on wishful thinking and propaganda than any serious analysis.[11]

Of course, it was no doubt argued within the counsels for war that a swift and decisive victory, which minimised the destruction of Iraq's infrastructure and avoided a 'humanitarian disaster', would greatly ease task of stabilising Iraq. Once it was stabilised it was assumed that the enormous potential wealth of Iraq would be sufficient to entice American capital into the reconstruction of Iraq in the 'free market' mould. There would therefore be little call for the American state to pay up-front for the costs of reconstruction.

For the naive ideologues amongst the neoconservatives, the overthrow of Saddam Hussein would lead to a democratic bourgeois revolution. With their 'natural' aspirations towards 'freedom, democracy and the American way' repressed for decades under the despotism of the Ba'athist regime, the Iraqi people were expected to welcome American troops as liberators, and to embrace the American educated Iraqi exiles that accompanied them as the prophets of a 'new free Iraq'. A new 'free enterprise Iraq' could then be constructed that would stand as a model for the rest of the middle east. The democratic revolution in Iraq could then serve as the start of a sequence of democratic revolutions that would transform the region in America's image.

The 'old-hands' and 'realists' amongst the neoconservatives and within the Bush administration as a whole were less hopeful of a democratic revolution. For them the fall of Saddam Hussein was more likely to lead to the disintegration of Iraq. However, they hoped to be able to 'decapitate' the regime without destroying the state apparatus. By maintaining the former state apparatus, minus its upper echelons, it would be possible to sustain a strong and unified Iraq that would now be pro-American and provide a bases to further isolate Iran.[12]

The different policy conclusions that could be drawn from these two alternative scenarios for the immediate post-war period were potentially in conflict. For example, should the occupying forces intervene against the 'Iraqi people' in order to shore up the state apparatus? Or should they stand back and let the 'Iraqi people' take their revenge? However, such conflicts never arose since neither scenario arose!

For the coalition forces to be welcomed as liberators would have required mass collective amnesia on the part of the Iraqi population. They would have had to forget the British occupation of the 1920s, the support of Saddam Hussein by successive US governments, the hundreds of thousands killed in the second Gulf war of 1991, the subsequent decade long punitive sanctions imposed by Britain and America and the casualties inflicted in the recent war. Indeed, the middle classes, who would have been most likely to have supported any democratic revolution, were the very classes that had lost most due to war and the economic sanctions of the last twelve years and look like continuing to lose as the last vestiges of the modernisation regime are destroyed.

However, the 'realists' hopes of utilising the state apparatus in the immediate aftermath of the war was dashed with its almost complete disintegration following the flight of Saddam Hussein and his entourage.

The problems of the immediate post-war period of social and economic stabilisation, which were glossed over in the pre-war planning, have now emerged to haunt the Bush administration. At the time of writing the occupying powers have dismally failed to restore Iraq's economy even to its rather dilapidated pre-war condition. Whereas the old regime had been able to restore at least intermittent electricity and water supplies to most of Iraq in less than three months in the far worse circumstances that had followed the second gulf war of 1991, the coalition has abysmally failed to do so. With mounting resentment turning into active opposition the coalition forces face the dilemma of taking a hard-line responses to impose 'law and order' at the risk of inflaming the situation or else sitting back and letting things take their course. Yet if order and security is not imposed soon it seems unlikely that American capital will be enticed to invest in the reconstruction of Iraq.

At the end of the war it had been confidently announced that the stabilisation of Iraq would take only a matter of weeks. A new governing council could then appointed that would have the authority to sanction the selling off of Iraq and allow American capital to begin the 'reconstruction' of Iraq. This would then be ratified with an election within little more than a year. However, this timetable is now in tatters and the occupation of Iraq is descending in a shambles.

Unless the situation in Iraq can be turned around soon, the neoconservative project faces being run into the sands of Iraq. If the cost of the occupation continue to mount at the present rate (presently estimated at over a $1 billion a week swelling an already ballooning US government budget deficit) and if the body count of American soldiers continues to rise, it will not be long before calls to bring troops home will become irresistible - particularly in the run up to the Presidential elections next year.

The Bush Jnr administration faces the nightmare prospects of being forced in an humiliating withdrawal, which would expose the US as little more than a paper tiger and lead to the dismemberment of Iraq between Turkey and Iran. This would create the very opposite outcome to what the neo-conservatives had wanted. As a consequence, the Bush administration has been forced to go back to the UN to ask for help in the costs of occupying Iraq. But this will mean allowing France, Germany and Russia to get their 'snouts into trough' - amounting to a relapse into the restrictions of multilateralism.

Time would seem to be running out for the neoconservatives. If they are to maintain their political momentum they will have to speed up the progress of their project. However, given the unravelling fiasco in Iraq, any attempt to escape their predicament faces formidable obstacles.

One of the obvious next steps for the neoconservatives to take in order to maintain their political momentum would be to pursue regime change in Iran - which as we have argued is the next vital piece in the jigsaw of the Middle East.[13] As soon as the invasion of Iraq was over the Bush administration began stepping up the pressure on Iran over its alleged development of nuclear weapons. Both Iran's nuclear weapons programme and its sponsorship of various 'terrorist' organisations could provide perfect pretexts for the US to go to war with Iran and would probably stand up to much closer scrutiny than the pretexts used to attack Iraq.

However, an invasion of Iran presents serious problems for the Bush administration. Firstly, it would be more difficult than Iraq to build a coalition of the willing for an invasion of Iran. For one, Tony Blair would find it far more difficult to deliver British support for such a project. After Iraq Blair has exhausted his credibility in such affairs. Furthermore, in contrast to Iraq, Britain's policy has been far more closer to that of the rest of Europe with regard to Iran. In the hope of gaining a head start over the US once Iran has been reintegrated into the 'international (bourgeois) community' Britain, like the other major European powers, has consistently advocated a policy of 'constructive engagement', placing its hopes in the reformist policies of Khatami. This has allowed British capital to develop economic interests in Iran unhindered by sanctions.

Secondly, a war against Iran would be far more risky. It is true that the US would have supremacy both at sea and in the air. It would have the options to invade Iran from the Persian Gulf, Afghanistan and from Iraq. It is also true that the huge debts and worsening economic situation resulting from the First Gulf war of 1981-88 has meant the Iranian armed forces remain badly equipped and under resourced, and the fervour that led to thousands of young soldiers to make suicidal charges against Iraqi machine gunners is likely to have dissipated. However, in contrast with Iraq, an invasion of Iran would not be simply finishing off a job already half done. The Iranian armed forces remain undefeated and could well inflict heavy casualties on an American invasion force. Furthermore, once Iran was invaded the USA would then face the prospect of having to occupy indefinitely not only Iraq but also the much larger Iran. Being drawn into a prolonged low intensity conflict in Iraq, Afghanistan and Iran would certainly be a nightmare for the US.

Another option for the neo-conservatives would be to try to promote the overthrow of the Iranian theocracy. There is certainly growing discontent within Iran at the authoritarianism of the regime and growing discontent at the failure of the reforms promised by Khatami. The Bush administration has already begun to encourage anti-regime protests. However, open American support for the opposition in Iran only serves to discredit it, particularly if at the same time the Americans threaten to use force. Indeed, it seems unlikely that an uprising against the regime will come soon enough to rescue the neoconservatives in the Bush administration.

The third option would be to use the pretext of Iran's sponsorship of 'terrorism' or its nuclear weapons programme to impose punitive sanctions that might eventually destabilise the regime. However, the imposition of punitive sanctions, comparable with those imposed on Iraq, would not only take time to work but would require the support of UN and the other great powers. The US would be obliged to adopt a more multilateralist approach.

It would seem then, that at least in the short to medium term, US foreign policy is likely to be drawn back towards multilateralism. The New World Order of Bush Snr will have to been modified but will be reconstituted. But what of the longer term? This depends on the world economic situation.

For many amongst the anti-war movement it would seem that the US government has been taken over by a neo-conservative cabal that has turned the USA into a rogue state that is intent in ripping up 'international law' and wreaking havoc across the world. However, as we have argued the neo-conservative project is already in danger of running out of steam. As the US economy teeters on the edge of 'deflation', which has only so far been averted by the large scale tax cuts and by cutting interest rates perilously close to zero, the sheer expense of an aggressive unilateral foreign policy is going to appear increasingly unaffordable. The pressure to rein in the aspirations of the neo-conservatives can only grow.

This would seem to lend support to those who have suggested that the adoption of neo-conservative foreign policy is a last desperate attempt by America to use its military power to offset its long term economic decline. However, although the US economy has suffered since the collapse of the dot.com boom and faces an uncertain future it has perhaps fared better than its main rivals. Japan remains mired in more than a decade of economic stagnation, while Europe is slipping into recession. None of its great economic rivals would seem to be in any position to put up a serious challenge to the USA's economic dominance in the short term to medium term.

It is perhaps not so much the relative economic decline of the US that is the problem, but the crisis in the current phase of American-led world accumulation of capital. During the American-led phase of capital accumulation that followed the Second World War, which led to the long-post war boom of the 1950s and 1960s, the US had exported industrial capital to the rest of the western world. American production, and production techniques such as Fordism, was replicated across the western world creating new industries and transforming old ones so as to expand the avenues for the production of value and surplus-value. As a result, capital accumulation in the US served as the locomotive for capital accumulation across the industrial world.

In contrast, the current phase of American-led world accumulation has been far more predatory. Taking advantage of the results of state-led capital accumulation, particularly in certain parts of the periphery, American moneyed-capital has simply bought up existing sources of the production of value and rationalised them to squeeze out more surplus-value. At the same time the emergence of global finance capital has meant that the higher profitability of US controlled capital has become a powerful magnet for money-capital looking for investment opportunities. As a result surplus-value produced in Japan and Europe is invested in the US, or by US controlled financial capitals. As a consequence, the rate of capital accumulation in Japan and Europe has declined. Hence, the accumulation of American capital has been at the expense of the accumulation of capital in the rest of the world, and increasingly so in Europe and Japan.

However, up until recently the potential tensions and conflicts that have emerged due to the predatory nature of the current phase of American-led world accumulation have been containable within the institutions of global governance. This is true of both the relation between the US and the rest of the more advanced economies and between 'developed North' and the 'undeveloped South'.

For much of the 1990s the ruling classes of the 'emerging market economies' were well rewarded for abandoning any aspirations towards independent national accumulation and instead acting as mere agents for international capital. Although for large sections of the population in these 'emerging market economies' the adoption of neo-liberal policies led to increased job insecurity, cuts in public provision of health, education and welfare, and sharp falls in real wages; for the ruling classes, and for many of their middle class allies, the influx of foreign capital, which such policies attracted, provided ample opportunities to make substantial material gains. For the ruling classes of the rest of the 'developing world' the aim was to get in on the act by positioning themselves to be the next country to be recognised by global capital as an 'emerging market economy'.

As a result, most of the ruling classes of the periphery fully embraced the neo-liberal 'Washington Consensus' and were anxious to be integrated into the 'international (bourgeois) community'. They queued up to join the World Trade Organisation and uncritically accepted the one-sided agenda of 'free trade' dictated by the US and Europe.

However, the pickings to be had from the carcass of failed national accumulation was strictly limited. Once its industries had been 'rationalised' and its public utilities privatised the profits that could be made out of an 'emerging market economy' began to dry up. Even in East Asia, where there had been substantial investment in productive capital, the advantages of having a cheap and compliant labour force was soon undercut by the next wave of newly 'emerging market economies' and by an increasingly oversupplied world market for manufactured commodities.

As a result of past inflows of international capital the 'emerging market economies' faced a remorselessly growing outflow of profits, interest and debt repayments to the US and its confederates in the West, which could only be covered by an increasingly speculative and short term inflows of money-capital, which was now pursuing diminishing returns. In 1997 the crunch came with financial crisis of East Asia, which soon spread across the world's 'emerging market economies'. The ruling classes of these economies now found themselves castigated for corruption and cronyism by their brethren in the West and faced with the task of imposing severe austerity measures in the face of growing social discontent while the Western bankers and speculators were bailed out of their difficulties by the IMF.

As a result, the ruling classes of the periphery have become far more circumspect about the advantages of neo-liberalism and free trade preached by the US and Europe. A growing division has emerged within the 'international (bourgeois) community' between the 'rich North' and the 'poor South', which, has markedly slowed down the attempts to advance 'free trade and neo-liberalism through the multilateral institutions such as the WTO. Following the breakdown of the Seattle meeting of the WTO, the US was been obliged to shift towards advancing its agenda for 'free trade' and liberalisation through bilateral agreements in attempt to divide and rule an increasingly recalcitrant bourgeoisie in the peripheries.

These bilateral agreements were presented as 'paving the way' for more comprehensive multilateral agreements to be negotiated in future WTO meetings. However, following the recent collapse of the Cancun meeting of the WTO these bilateral agreements are likely to become more of an alternative than a complement to multilateralism of US trade policy.

However, perhaps more importantly than this 'North-South' divide is the relation between the US and Europe. As we have pointed out, the free movement of capital has meant that large sections of the European bourgeoisie have been able to buy into the success of American capital. At the same time the strong dollar since the mid-1990s has allowed European exporters to share in the expansion of the American economy. As a result there has been a strong commitment on the part of the European bourgeoisie to maintaining the regime of American-led global accumulation. Indeed, the need to compete with America has provided a powerful argument for many within the European bourgeoisie for the adoption of neo-liberal policies and for attacking the entrenched positions of the European working class.

However, the end of the dot.com boom has led to a sharp slow down in the US economy. Although expansionary fiscal and monetary policies have allowed the US to avoid an economic slump, the American economy is presently teetering on verge of a prolonged period of economic stagnation. The slow down in the US economy, together with a weakening dollar, has already lead to stagnation in many of the major European economies. It is possible that the destruction of capital in the recent slow down of the US economy may be sufficient to allow it a further brief economic surge. However, if the US enters a period of economic stagnation then fate of much of Europe is likely to be worse. As competition for stagnant or even shrinking world markets intensifies, calls for protectionism will mount on both sides of the Atlantic, placing great strains on the world economic order. Indeed it could be well be that just as America's aggressively unilateralist military interventionism is running into an impasse, the multilateral system of 'globalised economy' could begin to break up if the US fails to escape being dragged down into chronic deflation.

[1] Despite the opening up the US economy since the Second World War, the continued insularity of the American population, and indeed large parts of the bourgeoisie, has a firm economic foundation. The USA is a huge continental-wide economy, which, with Central and South America, has a well established hinterland that has ample reserves of raw materials and cheap labour. While the scale of production of many manufacturing industries has outgrown the confines of the European size nation state, only the largest industrial capitals produce and sell on a truly global scale. The horizons of most American industries are amply circumscribed by the New World of the Americas - which constitutes by far the largest market in the world.

US exports of goods account for only 8% of its GDP (OECD Survey 2000). The USA's main trading partners are Canada and Mexico. Trade with these two countries combined is greater than that with the entire European Union. Indeed, more than 95% of 'goods and services' produced in the USA are sold within the Americas.

Moreover, whereas the total value of international trade in the entire world was $6.5 trillion in the year 2000 (OECD Monthly Statistics of International Trade, June 2003) the US GDP stood at $9.8 trillion (OECD Survey of USA 2003). In other words the US domestic market is nearly one and half times bigger than the world market represented by international trade! Hence, for large swathes of the American bourgeoisie, the US market, for all intents and purposes, is the world market.

However, a fully fledged isolationist foreign policy would seem an unviable option. Firstly, so long as the US enjoys economic supremacy any retreat from an active foreign policy, which is necessary to maintain the drive towards 'free trade' and ensures America's dominance of the world's financial system, would be detrimental to the interests of the US bourgeoisie as a whole. Furthermore, those with most to gain from an interventionalist foreign policy - the financial institutions of Wall Street, the major multinationals, the oil majors and the military-industrial complex, are the most powerful and influential sections of the American bourgeoisie. As consequence, an active interventionist foreign policy has traditionally been the orthodoxy of the policy making establishment and has been adopted sooner or later by most mainstream politicians. However, isolationism has been a central issue uniting various anti-establishment and populist political campaigns rooted in particularistic interests. As an amalgam of often contradictory interests the isolationist tendency is often incoherent and diffuse. It has been led by maverick politicians of both the Right - e.g. Ross Perot and Buchanan - and the Left - e.g. Dick Gephard. Nevertheless, there is a widespread isolationist sentiment in the American Congress that in the right circumstances can be mobilised to constrain foreign policy and is a political force that can not be ignored.

In the late 1980s and early 1990s, much to alarm of some commentators, isolationist sentiments began to penetrate the foreign policy establishment. Even the editors of the main house journals of the foreign policy establishment began to argue for a gradual disengagement from world affairs in the face of the perceived decline of the US economic power. (see J. Muravchik, The Imperative of American Leadership: A Challenge to Neo-Isolationism (AEI Press, 1996).

[2] Indeed, as we have seen in the run up to the war in Iraq, the American generals have proved far more reluctant to invade Iraq than the civilian military strategists that surround Rumsfeld.

[3] This doctrine of using overwhelming force in order to minimise US casualties has been named after its principal advocate, Colin Powell, who is now secretary of state in the Bush administration.

[4] It has often been argued that April Glaspie's remarks to Saddam Hussein gave the green light to Iraq's annexation of Kuwait. As such they were part of a well prepared trap that gave the US an excuse for war. However, we do not accept such a 'conspiracy theory'. It seems that the decision to annex Kuwait was taken at the last minute. Even the Iraq generals expected military action to take the form of minor border incursions until just hours before the invasion. What April Glaspie seems to have given the green light to was a minor border incursion not a wholesale annexation of Kuwait, with all the destabilising effect that could have had on the balance of power in the middle east.

[6] In the long term it is China that it is seen as the main potential rival to US hegemony. Combining the advantages of the command economy with those of the 'free market', the past decade has seen rapid export-led economic growth based on low labour costs, which is transforming China into the new 'workshop' of the world.

[7] Of course, predictions for the depletion of oil and other natural raw materials are notoriously unreliable. They depend on a number of assumptions concerning the rate of economic growth and the consequent demand for oil as well as the investment decisions of the oil companies. The prediction of an oil crisis in 2010 is a worst case scenario that was based on the assumption that the 'New Economy' had abolished recessions. Other more realistic predictions put the oil crunch in the 2020s. However, it must also be remembered that it can take up to a decade to develop a new oil field so that it can supply the world market, and up to two or three decades before such new fields reach peak production levels. Thus, both the oil companies and governments have to take such predictions seriously.

[8] Of course, September 11th came in the wake of the collapse of the dot.com boom. An amorphous external threat was a timely distraction for Bush Jnr and the Republican Party machine in the face of growing economic problems at home.

[9] Of course, under both Bush Snr and Clinton America's commitment to multilateralism was never absolute. The US had always reserved the right to take action on in its own interest. As Madeline Albright has put it, the principle was 'multilateralism if possible; unilateralism if necessary'. For example, the war in Kosovo was carried out under the auspices of NATO and was only retrospectively sanctioned by the UN Security Council.

[10] Of course several thousand civilians and unknown numbers of Iraqi soldiers were killed in the war but far less than some had predicted.

[11] Of course, it was concerns for the problems that might arise after the overthrow of Saddam Hussein that had led to Bush Snr to cut short the war in 1991. The neo-conservatives were no doubt concerned that such fears should get in the way of finishing the job in Iraq this time.

[12] Indeed, in the run up to the war there were renewed attempts by the Americans to encourage a coup from within Ba'athist Party in order to oust Saddam Hussein. During the war itself there were several well publicised efforts to kill leading members of the Iraq regime. But all these efforts to 'decapitate' the regime so as to leave the state apparatus in tact failed.

[13] Of course the alternative move would be a confrontation with North Korea, which can be seen as part of the neoconservatives long term plan to pre-empt the rise of China as a long term rival to the USA.

Appendix: Oil Wars and New World Orders in Historical Context

Following the conversion of the Royal Navy from coal in 1911 and the development of petro-chemical industries after WW2, oil became a militarily and economically important resource for the major imperialist powers.

While the transition from coal based accumulation to oil based accumulation allowed capital to escape dependence on the miners in the advanced capitalist nations, it now became dependent on the oil fields in the Middle East; in particular the Gulf region which after the establishment of the oil industry in Iran in 1909, Iraq in 1925 and Saudi Arabia in 1933, came to be seen as the world's most strategic area to control.[2]

Ironically, however, the most strategic area of the world for the West became its most troublesome. By 1991 Iran was governed by an Islamist regime and Iraq by the secular national-socialist Ba'ath party - both of which were virulently anti-Western. Similarly, Saudi Arabia was riddled by social crisis, which would fuel Saudis' dissent against the regime's commitment to the US during the Second Gulf War. This crisis would later lead to the worldwide emergence of small Islamist guerrilla groups, mainly composed of Saudis financed both directly and indirectly by the Saudi State. This problematic state of affairs in the Gulf is not just a co-incidental misfortune, but the result of contradictions created by the subsumption of the Middle East into the world market, the effect of the creation of new nation states and oil interests in the Gulf; kept alive through the direct and indirect support of the Western powers.

The effect of Western industrial capitalism on the social relations of the Middle East

Up until the 19th century, the mode of production in the Middle East was determined by the coexistence of merchant capital in the towns and cities and nomadic pastoralism in the desert areas. The urban centres' economy was mercantile and artisanal, organised around pre-capitalist guild structures where there was no dynamic of capital expansion. The desert regions were populated by nomadic tribes, structured along kinship relations and organised in networks known as tribal confederations. In an area of the world characterised by desert or mountainous areas with limited fertile lands, mobility and military prowess was more important than productivity in raising livestock. Indeed, the tribes that were best fitted for war and raids were the most powerful.

Islam was the dominant religion in the Middle East. It arose in the 7th century in the Arabian Peninsula, as a socio-cultural phenomenon and as a system of power, which served to resolve the contradictions brought about by the development of trade within a nomadic environment. Successful trading relations of the urban centres depended on the security of trading routes and these were under constant threat of raids by the nomads. Islam reconciled the needs of trade with the interests of the nomadic tribes. In fact it provided the base for the creation of religious based empires that, on the one hand, could impose Islamic law and order in their territory and on the other, enrolled nomadic tribes as their military force in the 'holy' wars (jihad) of expansion. By the 19th century, the great Islamic expansions were over. The Ottoman Empire - based on the Sunni sect of Islam - ruled over most of the Middle East, including the area of modern Iraq and the coasts of Saudi Arabia. Iran was ruled by the dynasty of the Qajars which championed the Shi'a sect of Islam. Both the Ottoman Empire and the Qajar dynasty gave the tribes plenty of autonomy and the right to collect revenues from the settled agriculturists. In return the tribal leaders restrained their followers from attacking merchants' caravans. This system was at the root of the creation of hierarchies of tribes, with 'noble' tribes of warriors dominating over weaker pastoral tribes and settled communities.

During the 19th century the Persian Gulf began to feel the impact of Western industrial capitalist mode of production. While the Ottoman Empire was largely hostile to the West, Britain managed to develop good relations with the Qajar Shah of Iran. It obtained favourable trade agreements and concessions in return for the exploitation of Iranian resources and crops. By the late 19th century, after the opening of the Suez Canal, Western interests extended to Iraq. However Saudi Arabia, being mostly a desert and easily avoidable by coastal trade routes, was left unaffected.

Like most regions of what was to become known as the undeveloped world, the main relation of Western industrial capitalism to the Gulf was mediated through the dominance of mercantile capital, which would serve as bridge and agent of the West. Its success depended on maintaining traditional stable social and political conditions locally, yet paradoxically it had a destabilising effect by undermining traditional authorities through its monetarisation of their underlying social relations.
The pressure of the Western economy manifested itself in two ways. Firstly the Middle East came to be seen as a potential market for Western industrial products and secondly the western market encouraged their production and export of agricultural goods such as wheat, opium and tobacco, the consequences of which contributed to the destabilisation of the local social system. It did this in two ways. Firstly, the exposure of the urban centres to Western industrial products, whilst benefiting a small élite of long distance merchants, threatened the economy of the small traders and artisans of the urban markets (bazaars), causing discontent and resentment in the urban populations. This resentment was shared by the clergy, who had prospered on the tithes and religious gifts paid by the guilds. Secondly, the West's demand for crop production encouraged many nomadic tribes to settle and transform themselves into cultivators, which meant they lost their traditional power derived from their mobility. The traditional tribal relations were increasingly replaced by new social relations based on economic exploitation. Tribal leaders began to lose their legitimacy in the eyes of their fellow tribesmen when they began to transform themselves into absentee landlords leaving the tribesman to become impoverished tenants. All this led to the disintegration of the tribal confederation, which, having guaranteed social stability for centuries, had far-reaching consequences. A further destabilising factor was introduced by the switch in agriculture from production for subsistence to monoculture production for the market, which made the economy increasingly dependent on international markets and therefore subject to crisis.

The effect on the social relations of the Middle East through the creation of new nation states

In the 20th century the imperialist powers sought to increase their economic influence in the Gulf by military and political intervention. With the final collapse of the Ottoman Empire after WW1, and the Sèvres peace treaty of 1920, Britain and France were given a mandate to establish nation states in the Middle East. This allowed the West to exercise more power in the region.[3] The British military and diplomatic intervention in the Gulf (Iraq, Iran and Saudi Arabia) had important socio-economic consequences. In order to maintain control they generally employed the strategy of supporting traditional élites and authorities of the region, and in doing so they helped revive old powers that were already being undermined by the impact of western industrialism in the economic sphere. Indeed British efforts to sustain and maintain the old social order actually contributed to its destabilisation.

In Iraq, Britain aimed to install a regime that would support them. The population of the urban centres was mostly hostile to the imperialist power, with the exception of few merchants tied to Western markets. In order to consolidate the social base of the new regime, Britain sought to shore up the power of the tribal leaders by creating a conservative élite based on land ownership. The British-supported 'Lazmah' land reforms of 1932 effectively completed the transformation of the tribal leaders from tribute receivers into landowners, thereby increasing their economic power.[4] These reforms, however, also served to accelerate the process of fragmentation of tribal relations, thereby further destabilising the traditional social order. Furthermore the establishment of private property in the rural areas had the effect of dispossessing agriculturists from common land. This lead to discontent which would later encourage widespread migration to the cities, altering the traditional urban social structure.

At the end of WW1 Iran faced popular revolts triggered by economic crisis and inspired by the Russian Revolution. This encouraged Britain and the US to support a coup that would re-impose order with the use of force which led to the establishment of the pro-Western Shah Reza Khan. As in Iraq, the new regime sought to bolster the economic power of the landlords by introducing land reforms, which formalised the landlords' power over the land as private property. On the other hand, in order to regain control of the cities, the new State sought to 'modernise' which mainly involved the creation of white collar state jobs, education for a small minority, the secularisation of legislation and state institutions and the creation of a modern army. 'Modernisation' provided a way for the regime to redefine its social base, by creating a middle class urban élite and marginalising the clergy, who threatened to mobilise anti-Western sentiments. Furthermore the creation of a modern army allowed the State to attack the surviving nomad tribes and force them to settle.

Iran took advantage of the international crisis of 1929 by taking steps towards a state-led industrial 'development'. This project, however, was not aimed at developing the bulk of national production and trade, rather it created a handful of large industries which survived only thanks to both state intervention and the creation of state monopolies. By WW2 the Iranian regime was successfully based on a conservative élite consisting in long distance merchants, a few big industrial capitalists dependent on the state, landowners, and a small middle class of state functionaries. It shared with Britain an interest in maintaining the social and political status quo, the cohesion of which was guaranteed by revenues from oil royalties paid by the British-owned oil industry, established in 1909. However the British economic influence made Iran's economy dependent on international market prices and prone to crisis, as well as undermining the economy of the urban centres through competition with its products. Like everywhere else in the Gulf, the contradictions created by the British presence in Iran would have explosive consequences in the future.

Another consequence of the weakening and collapse of the Ottoman Empire and of the direct British intervention in the Gulf was the emergence of the kingdom of Saudi Arabia. Saudi Arabia was formed as a result of the expansion of the emirate of Ibn Sa'ud from central Arabia outward and the submission of the dominant tribal confederations of the peninsula to Saudi rule.[5] The expansion and subsequent stabilisation of the kingdom was encouraged and supported by Britain.

The newly formed kingdom of Saudi Arabia was the most extreme case of an anachronistic and unstable system that could only be created and maintained due to British intervention. The Saudi expansion was carried out by tribal forces which, like the pre-capitalist emirates of the past, were rewarded with the spoils of war. The expansionist war was ideologically justified as a jihad to spread Wahhabism - a 200 year old puritan and revivalist version of Islamism

However, since this dynamic developed within new international relations between bourgeois states, this altered its very 'tribal' nature. When Sa'ud's tribal warriors reached the borders of British-controlled territories (such as Kuwait) the contradiction of Sa'ud dominion was exposed. Sa'ud's war depended on the military prowess of the tribes and yet his legitimisation also depended on the West's acceptance and support. Unfortunately, lacking both a modern army and the structure of a modern State, Sa'ud had no means of controlling the tribes he had unleashed, who were now demanding to continue the Wahhabi jihad across the borders. The suppression of the eventual tribal revolt and the stabilisation of Saudi Arabia could only be achieved through British intervention in the form of the Royal Air Force. In the years that followed, Saudi Arabia managed to dismantle its tribe-based army and replace it with a National Guard, and after WWII it would increasingly depend on US military and technical aid for its defence.

The Saudi State was
born as a tribal one that contradictorily had to force its tribes into settling thereby depriving them of the very source of their material reproduction - the raids. The pacification of the tribe had to be supported by State subventions that were financed by borrowing money from abroad and later by the revenues of oil. The subventions had the effect of sustaining tribal structures along patterns of privilege defined by genealogical belonging - a structure that would increasingly cause resentment in large layers of society. In this way the direct political and military influence of Britain, and, later, the revenues from oil production and the military support of the US, created and maintained an unstable social system at odds with its material conditions of existence.

The impact of oil

The capitalist mode of production and the Western imperialist power had caused destabilisation and dissatisfaction in large sections of the population in the Gulf; as well as inspiring anti-Western feelings in the urban populations of Iraq and Iran. These transformations were further exacerbated by the impact of the oil industry in the Gulf.
The discovery of abundant oil reserves in the Gulf transformed it into a region of vital interest to the West. As we have seen, the Western powers sought to maintain social relations in the Gulf after the collapse of the Ottoman Empire, that would not threat their interests. All that the oil industry needed was to secure access to the oil fields, which could be guaranteed by a compliant, stable local power. The stabilisation of the Gulf States into anachronistic structures of power dominated by small conservative élites (in opposition to the dissatisfied masses) acted in the interest of the oil industry. By WW2, and increasingly since, the royalties paid to the monarchs by the oil companies principally served to maintain their power against the threat of social crisis. In fact, the nature of the oil industry, which in itself was a self contained industry with few links to the rest of the national economy, allowed the dominant élites to survive in power and neglect or impede internal industrial development with no counter-effects on their gains and interests.[6]

However, while on the one hand the social stabilisation of the Gulf was a condition for the development of the oil industry, on the other it produced conditions which were to act as a catalyst for the emergence of important social movements that shook Iran in the '50s and Iraq in the '60s. In fact, unlike in America, the oil industry did not develop through the appropriation of land and mineral rights. Rather, a single foreign company (or consortiums of foreign companies) received concessions from the monarch to exploit the whole country.[7] It was this particular arrangement that allowed all the social forces opposing the existing regimes in Iran and Iraq to unite in a common struggle against the West around the issue of oil nationalisation. The economic importance of oil meant that it could be seen as something worth reclaiming as 'national' wealth, against the interests of the imperialist West. Thus, in both Iran and Iraq the issue of oil nationalisation offered a focus for the discontent already felt by different sections of the urban populations. It appealed to the already existing anti-Western sentiments of the petty bourgeoisie of the bazaars, who had fought to defend their traditional economy against the perceived ravages of modernisation. It appealed to sections of the military and middle class intellectuals, who saw the oil revenues as a means of introducing liberal reforms and delivering limited 'social justice' without affecting property relations. And lastly, the issue of oil nationalisation appealed to the emerging and increasingly combative urban proletariat, who demanded more radical social change. Thus sections of society with diverging interests could find themselves allied against one enemy: the West.

The radical impact of oil in the '40s and '50s in Iran and Iraq

The '40s and '50s thus saw massive popular movements, pivoting around the issue of oil nationalisation. In both Iran and Iraq union activity, protests and strikes, (above all in the oil industry) threatened social peace and the economy of the established order. In tandem with these struggles, the pro-Soviet Tudeh Party in Iran and the Iraqi Communist Party in Iraq (ICP) developed their organisations and emerged as leading forces, obtaining mass support from the growing urban proletariat, the clerical workers, and parts of the intelligentsia. However, in the heat of social unrest elements of the middle class, inspired by liberal ideals but uncomfortable with the demands of both the Communist parties and the masses, took power and attempted to recuperate the struggles.

In Iran in 1951, a small liberal party led by Mohammed Mossadeq was able to gain massive electoral support to re-impose social peace on the issue of oil nationalisation. Once in power, he was obliged to carry it out. However his attempts were thwarted by an international blockade organised by the British. The blockade plunged Iran into economic crisis. The crisis served to re-invigorate those proletarian struggles that Mossadeq's power had been supposed to recuperate. Mossadeq responded with open repression, eventually alienating the support of the Tudeh party, which the regime needed to maintain its power against the pressure of the conservative bazaars and the military.

Iraq had been shaken by mass protests and strikes in the '40s and '50s. With the '1958 Revolution' the 'Free Officers' led by liberal officer Abd al-Karim Qassem seized power obtaining the support of the urban masses and the ICP. With 'law 80' in 1961 Qassem reasserted State sovereignty over Iraqi oil. However, his efforts were nullified both by lack of technical know-how and constraint exercised by the monopoly of the Oil Majors over oil processing and distribution.[8]

Although the revolution was welcomed by everybody opposed to the old ruling classes and united by anti-Western feelings, as soon as the old regime was overthrown the popular movement that had arisen in support of the new government began to split. anti-Communist forces, (based on sections of the middle classes, the petty bourgeoisie of the bazaars and the right wing of the army) urged the State to distance itself from the ICP through an invocation of Pan-Arabist ideology. Pan-Arabism had been an ideology shared by intellectuals and military officers in many Arab countries. It invoked the unity of all Arab nations against Western imperialism, and provided an alternative modernising ideology to Stalinism. The Iraqi Pan-Arabist urged Qassem to embrace the ideal of Arab unification and join the unification of Egypt and Syria since it had already proved itself successful in the repression of communist movements in Egypt and Syria. This was an unrealistic ideal (in fact the union between Egypt and Syria did not last long) since the ideology of Pan-Arabism lacked any strong social base being rooted only in the intelligentsia and the army. In contrast the growth of the Communist party was supported by many layers of Iraqi society. As a result Qassem sought to reach a deal with the ICP in order to provide much needed popular support for his regime. He did this by appealing to an 'Iraqi national' identity which opposed the pan-Arabist fusion with, or submission to, Egypt.

That it was impossible for the liberal forces in Iran and Iraq to maintain themselves in power without having to compromise with the Communists, was the result of the underdevelopment in the previous two decades. This variously impeded the formation of a strong local industrial bourgeoisie, a stable middle class interested in building a compliant labour force, and the creation of political institutions that could create a national 'consensus' around liberal issues. In the face of continuing social unrest and the West's fear that the Gulf would turn towards the Soviet Union, the anti-Communist forces regrouped and staged a coup d'état in both countries.[9] In Iran in 1953 Mossadeq was removed by the military and a mob from Teheran's bazaar and the Shah (Mohammed Reza) was restored to power. This coup was financially supported by the US through the CIA, and the US made sure to maintain its control of Iran afterwards, through military and administrative advisors. In Iraq in 1963 Qassem was removed by a coup organised by the right wing of the army and a small unorganised national-socialist party - the Ba'ath. In 1968 the Ba'ath Party took full control of the State.

The new era of oil boom

These new regimes did not reverse the process of oil nationalisation initiated by their predecessors. After the fall of Mossadeq, Iran was able to obtain formal recognition of the nationalisation (with the concession rewritten as a lease) and a 50-50 share of oil, which became 75-25 in its favour in 1958. In Iraq, the Ba'ath championed the ideals of anti-imperialism that were still popular among the masses and sought to nationalise oil. By pursuing a policy of alignment with the Soviet Union, the Ba'ath earned the technical aid necessary for the effective nationalisation of oil in 1969.

During the '60s the outlook for the oil producing countries seemed to change with the formation of the Organisation of the Petroleum Exporting Countries (OPEC) in 1960. OPEC was set up with the aim of co-ordinating the export policies of its member states in an attempt to regulate oil prices. It also aided the formation of the Organisation of Arab Petroleum Exporting Countries (OAPEC) in 1968. However, the policies of OPEC/OAPEC only brought short term benefits since their efforts to regulate oil price in the international market were disrupted by non-OPEC oil producers. In any case, the oil shortage in the '70s hit America allowing OPEC to successfully raise the price of oil in its favour. This broke the monopoly of the oil giants over production and distribution, which contributed to the effective nationalisation of oil in the Middle Eastern countries.[10]

The oil boom of the '70s and the increasing State control over oil production in the Gulf delayed the inevitable explosion of the contradictions existing in Iran, Iraq and Saudi Arabia. The bolstered state revenues were used to pacify the populations. While all countries boosted white collar jobs in the civil services, in Iraq and Iran this also took the form of investment in economic development, with large scale agricultural modernisation in Iran and the encouragement of small and medium business in Iraq through national development projects.[11] On the other hand Saudi Arabia had been the most unwilling and unable to allow for economic or social reforms. Its social structure still reflected the old tribal system while the redistributive role of the State had the effect of freezing both social and economic development. Unlike Iraq, Saudi Arabia did not patronise development in production to any great extent, rather the new system, with its generous welfare benefits and a profusion of white collar State jobs, was simply a re-definition of the old distributive rentier State in the context of an oil bonanza.[12]

Together with the carrot of state patronage (in the case of Iraq and Saudi Arabia), the regimes of all the three countries in the Gulf used the stick of repression against left-wing, religious and secularist opposition. In particular, Iran and Iraq developed efficient security services, which prevented the re-organisation of mass parties. But while the Ba'thist regime used its patronage of whole sections of the population to divide the opposition, as witnessed by the partial co-option of the ICP and the integration of the urban poor, the Shah carried out a program of systematic repression which united his enemies.

The emergence of the anti-Western Shi'a regime in Iran

Up until 1979, the Iranian regime still relied on US and Western support. Massive state expenditure was invested in the purchase of advanced military equipment from the West. Funds were spent on education and an expanding civil service with the aim of swelling the middle class. However clumsy attempts at industrial development only served to push Iran into deeper crisis.

By 1977 dissatisfaction was widespread among both the rural workers and the landowners, because of land reforms introduced by the State during the past decade. These reforms had been introduced to modernise labour relations in the countryside and distributing a portion of the landlord's property amongst the peasants. They were not only opposed by the landowners but also by the peasants who had to pay for the reappropriation in cash, which could only be raised by producing for the market as opposed to production for subsistence.[13] The urban proletariat was augmented by migrations from the countryside caused by the resulting social upheaval. With a new economic crisis hitting the country in 1977, this generalised popular discontent exploded in the '1979 Revolution'.

The opposition to the Shah was thus composed of both conservative sections of society, such as the urban bazaars and landowners, as well as parts of the urban proletariat, the middle class and the intelligentsia who opposed the Shah by demanding liberal or social reforms. They were united against the US-backed regime of the State in the name of anti-imperialism.

In fact, the Revolution was initially fought by left-wing groups alongside the Shi'ite fundamentalist Islamic Republican Party (IRP), an alliance between the clergy and the bazaari merchants. The IRP's nostalgia for a pre-development bazaar exerted strong appeal to those who saw the regime of the Shah, bowing down to the interests of the US, and its efforts to 'modernise', as a failure. The Shiite fundamentalist cause acquired prestige from a spectacular occupation of the American embassy. At the same time they managed to create a middle class base for their support, by seizing control of newly formed public institutions and rewarding their supporters with key positions. They were also successful in organising urban youths into street gangs (the Hizbollah), and engaged them in imposing Islamic customs on the passer-by. The enthusiasm conveyed by IRP's street actions and the appeal of anti-US rhetoric is not enough to explain the Shiite fundamentalism success with the proletariat. One reason for the IRP's success of was that it filled the void left by the secular and left-wing opposition which had been crushed through decades of repression. While under the shah left-wing organisations were dismantled and forced underground, the mosques had been available to the proletariat for socialising and organising. Once the IRP, led by Ayatollah Khomeini, was in full control of the State it unleashed systematic repression against what remained of the left-wing and secular groups who had participated in the Revolution.

The crisis of the oil monarchs and the rise of Islamism

The high price of oil in the '70s had led to increased investment in developing and expanding oil production. Higher cost non-OPEC oil fields (e.g. those in Alaska and the North Sea) grew, and the increased production began to come on stream at the beginning of the 1980s. Meanwhile, the demand of oil fell after the efforts in the developed countries to implement systems for the conservation of energy . The resulting fall of the oil price in the early 80s hit the State budgets of the three major countries in the Gulf, leading to increasing social discontent.

The first Gulf War from 1981 to 1988 between Iran and Iraq served to deal with the threat of social unrest in both countries. The mass deaths in the war fields and the state of national emergency within the two States allowed the two regimes to crush their internal oppositions and thin out the proletariat.

For Saudi Arabia, the '80s were a period of social and political crisis that the regime could not easily defuse. Despite the generosity of the Saudi welfare provisions in the previous decade, the distribution of wealth amongst the population had remained unequal and continued to reflect old patterns of privilege and hierarchies. With the fall of oil price in the '80s, the State was obliged it to cut back on its welfare provisions, the already existing discontent of the Saudi population deepened.

In the face of the various waves of pan-Arabism and anti-imperialism, it had been important for the Saudi regime to stress its Islamic origins. To do this it enrolled the more moderate part of the clergy, those willing to accept modernisation, into the state apparatus. However, the fervent and coherent anti-US and Islamic stance of the Shi'i Iranian leadership served to expose Saudi Arabia's markedly un-Islamic foreign policy and led to growing criticism.

This criticism would reach its climax during the Gulf war in 1990, when, fearing Iraqi invasion into their the oil reserves in Kuwait, Saudi Arabia had to recur to US military support subsequently allowing its territory to be used for attacking Iraq.

The Iranian Revolution also brought on the scene Shi'ism as an alternative Islamist rhetoric which exerted a strong appeal on the Shi'i communities - one of the most marginalised social groups in Saudi Arabia. Shi'ism emerged as a focus of political opposition, with religious festivals ending in clashes with the police and with the organisation of clandestine groups.[14] Yet Islamic opposition to the regime grew also within the dominant sect of Wahhabism. Islamism was used to criticise the 'Islamic' regime, particularly by intellectuals and young unemployed, often educated in the Saudi religious schools.

The Islamic opposition did not raise purely religious or political issues but economic and social ones as well: in fact, it did not only attack the pro-US and pro-West policies of the Saudi State - but also condemned the oligarchic character of the State and its inequalities; and it demanded more money for welfare, education and health services. Whilst the Saudi opposition was forced abroad by the regime, it managed to obtain increasing sympathy from the institutional clergy.

Islamic fundamentalism was not only a problem for Saudi Arabia. One of the most notorious Islamic fundamentalist organisation, the Muslim Brotherhood had been influential in Egypt at the end of the '40s. The '70s and '80s saw a re-emergence of radical Islam throughout the Middle East as a form of political expression of social dissatisfaction. With radical Islam the concept of jihad had a revival within a modern framework - jihad could simply be the action of guerrilla groups against their own States or the West, based on individual's fervour and small groups organisations. It was not a war for the extension of a territory but an individual action having predominantly a symbolic political meaning.

The Afghan War, which opposed the local Muslim population to the occupying Soviet force in 1979, offered to many States of the Middle East the opportunity to try and get rid of their indigenous Islamist trouble makers.[15] Arab States, including Saudi Arabia, encouraged ardent Muslim youth to leave their country and go and martyr themselves in a jihad against the Communist 'infidel' in Afghanistan. The US played an important role in training and sponsoring this newly formed Islamist militant forces. But Saudi Arabia had an important role also, by sponsoring and encouraging Islamists. It was the Saudi government, for example, that sent Osama Bin Laden to Afghanistan, and funded his operations.[16]

With the withdrawal of the Russians from Afghanistan in 1992 and a change in American public opinion and policy, the US stopped its support to the Islamist militant groups. The States of the Middle East, afraid that the Islamist extremism they helped create could be directed against them, closed their borders to the Mujahadeen. This left groups of exiled fundamentalist jihadi, with a growing resentment of the US who had 'used' them for their own ends, to find new wars to fight in other countries on behalf of fellow Muslims ( e.g. Bosnia, Algeria and Egypt). With the attack on Iraq in the '90s, these Muslim groups directed their efforts against the US, turning the jihad into guerrilla actions. Islamist jihadi created international links, one of which was Al Qaida. And it was a 'homeless' worldwide network of ex-fighters in Afghanistan that was responsible for the WTO bombing in 1993, while a group tied to Al Qaida was responsible of the final destruction of the Twin Towers in 2001.

Much of the finance for Islamic fundamentalists throughout the world came from Saudi Arabia. Whether this money comes from individual wealthy elements of Saudi society; or from the Saudi State budget itself through religious 'donations' paid by the clergy; in either case this fact casts a deep shadow on the trustworthiness of Saudi Arabia for the US.

A social crisis in Saudi Arabia is thus at the roots of an Islamic fundamentalist movement that is currently targeting the US and the West with 'dramatic' guerrilla actions. We have seen that this crisis has been the outcome of the creation and stabilisation in Saudi Arabia of an archaic social system, which had no other material conditions for its existence and reproduction except for the oil rent and the support of Western countries. This dependence has made the Saudi system dramatically dependent on both the oil price in the international markets and the skilled and technical input from West. The contradictions of such a system have emerged in their full extent with the fall of the oil prices in the '80s, which has created increasing unemployment and hardship and have destabilised the social status quo. In the case of Iran and Iraq, the effects of the Western influence in Iran and Iraq have triggered a chain of social events that has led to the establishment of two anti-US States. In the case of Saudi Arabia, the impact of the West and of the interests of the oil industry has led to a country that is currently incubating big troubles for the West and in particular for the US.

Conclusions

On the one hand, it was in the interest of the Western powers and of the oil industry to create and support a social system based on the political and economic dominion of a small conservative élite, which would share with the West the concern to maintain the social status quo in their territory. To this end they supported traditional local authorities. The oil royalties paid to the monarchs by the oil companies constituted an increasingly important factor for the stability of the oligarchic systems.

On the other hand, the same influence of the Western powers and the Western economy in the Gulf were factors of destabilisation that undermined the existing social relations on which the traditional powers were based. The penetration of the Western market in Iran and Iraq undermined the traditional urban economy of the bazaar, and slowly disintegrated traditional relations in the rural areas. In all three of the major countries the critical dependence on oil for the stability of the social system made the system dependent on the expertise of foreign oil companies and fluctuations of the international markets. This increased dependence made the economies increasingly vulnerable at the same time as holding back the only possible defence against this condition: the development of a national bourgeoisie. The social unrest produced by these factors led initially to the menace to Western interests presented by oil nationalisation. However nationalisation did not alter the fundamental block to capitalist development presented by an economy based on rent. The fate of these regimes, founded on the internal circulation of the oil rent, was only to become even more the victims of the international markets; and when the boom was over it was clear they ultimately could no longer afford the price they had paid to buy off their own population.

Anti-Western sentiment has always been the natural expression of discontent in the Middle East, a direct product of a century of Western intervention in the region. In the past this led to the setting up of regimes explicitly opposed to Western, particularly US, interests and the Middle East Question haunted the foreign policy of US governments. Today Saudi Arabia, the US's number one ally in the Middle East, strains to contain an incendiary mix of the most virulently anti-Western sentiment of all. Yet in contrast to previous ideologies such as Pan-Arabism, Islamism offers no alternative future of national development for the Middle East. In the case of the disillusioned Saudi dissidents it represents a purely negative reaction to the tenacious oligarchy with its dependency on the US. In the case of the Afghani, Iraqi and Palestinian masses relegated to a sub-proletarian existence, it is nothing but the hope of the hopeless and the reversion to pre-capitalist modes of social reproduction. The jihadis as 'homeless militants' are (with the exception of the special case of Palestine) detached from any mass social movement and as such their spectacular actions can be seen as the deterioration of Islamism in its very moment of glory. If the US manages to pick off the terrorists with precision there will not be the generalised repression required to build universal solidarity among Muslims.

Yet the terrorism enacted in the name of Islam makes it difficult for the West to identify possible alliances with reformist, non-threatening Muslims, a difficulty exacerbated by the absence of any convincing plan for the stable development of the Middle East on the part of the West. On the contrary it looks like a destructive reversion to a heavily policed pre-nationalised Middle East is on the cards, with Islamism on hand to pick up the pieces, but no-one to save the West from its immersion in the mess of a permanent crisis zone.

[2] Besides the oil fields in the former Soviet Union, which had been so far outside the control of the US and Europe, the twelve world's mega-fields (those with reserves over 1000 million barrels) are all in the Middle East: five in Iran, two in Iraq, one in Kuwait, three in Saudi Arabia and one in Libya.

[3] Specifically, Mesopotamia (Iraq), Palestine and Trans-Jordan were given under the British mandate, whilst Syria and Lebanon were given to the French.

[4] The Lazmah completed the process began by the Ottoman Empire with the tanzimat reforms.

[5] Ibn Sa'ud was the descendant of Mohammed ibn Sa'ud who expanded his territory in the 18th century (see Box).

[6] As an example, by 1958 in Iraq manufacture constituted only the 10% of the GNP.

[7] The concession for the exploration of the whole Iran was given by the Qajars to the British William Knox d'Arcy in 1901; this was followed by the discovery of oil (1908) and by the constitution of the Anglo Persian Oil Company (APOC, 1909), which became almost fully owned by the British government in 1914. A concession for the exploitation of the North of Iran was given by Shah Reza Khan to the Standard Oil Company of New Jersey in 1921. The concession of Iraq was given in 1925 by the monarch of Iraq Faysal to the Turkish Petroleum Company (later renamed Iraq Petroleum Company, IPC), owned by Britain and other European countries. And the concession of Saudi Arabia was given in 1933 by Sa'ud to the US Standard Oil of California (SOCAL) (oil was extracted from 1938).

[8] The law 80 of 1961 withdrew the concessions held by the IPC in all Iraq, with the exception of the limited areas that were already being exploited by then (the 0.5% of the national territory), laying the basis for the creation of a national company which could exploit the rest of the country. In 1964 the Iraqi National Oil Company was in fact created, but it was ineffective for lack of technical know-how.

[9] Qassem's liaison with the Soviet Union had worried the US, so much that in 1959 the CIA's director Allen Dulles declared that the situation in Iraq under Qassem was 'the most dangerous in the world'!

[10] Indeed it was only in the '70s that Iraq achieved oil nationalisation. Similar, in 1973 Saudi Arabia acquired 25% of ARAMCO, which became 60% the following year; and in 1980 Saudi Arabia took over the whole company.

[11] This modernisation followed on from the process of land reform started in the '60s.

[12] While white collar jobs were offered to Saudi educated citizens as a form of State support, Saudi Arabia depended on foreign labour force - on Western workers for skilled jobs and on Arab migrants for menial jobs.

[13] A similar law was passed by Qassem in Iraq, which similarly failed in its aims.

[14] Shi'i opposition emerged also in Iraq, where the Shi'i had been marginalised since the Ottoman times.

[15] Saudi Arabia was also worried about the Afghani refugees falling under the influence of their big competitor, and the enemy of the US, the Shi'ite Iran. The Saudi's for this reason spent a lot of money on Wahhabi schools in Afghanistan to counteract the influence of Shi'a, and it was these schools that eventually produced the Taliban.

[16] Osama Bin Laden was one of these 'homeless' militants. Born into a rich family that had made its fortune in the construction industry, the Saudi born billionaire, whose activities in Afghanistan were supported by the Saudi State during the '80s began to turn on his sponsors. In the months preceding Iraq's invasion of Kuwait in 1990, Bin Laden adamantly opposed the Saudi decision to call in' infidel' troops led by the US, to defend the Saudi frontier from the posturing of Saddam Hussein. As a result he was expelled from Saudi Arabia. Bin Laden's rhetoric was not only directed against the US 'infidels' but also against the Saudi ruling dynasty whom he accuses of being 'indebted' to both the devout middle classes and the higher social strata of the kingdom - his own class, whom he refers to as the 'great merchants'. Despite not claiming responsibility for a number of 'terrorist' attacks against 'infidels' Bin Laden has come to represent and be seen as accountable for the actions of the jihadists.